Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

DEATH OF A MEMBER

Madam Speaker: I regret to have to report to the House the death of Mr. Clifford Forsythe, Member for South Antrim. I am sure that Members on both sides of the House will join me in mourning the loss of a colleague and extending our sympathy to the hon. Gentleman's family and friends.

PRIVATE BUSINESS

CITY OF NEWCASTLE UPON TYNE BILL [LORDS] (BY ORDER)

Order for Third Reading read.

To be read the Third time on Tuesday 9 May.

GREENHAM AND CROOKHAM COMMONS BILL (BY ORDER)

Order for Second Reading read.

To be read a Second time on Tuesday 9 May.

Oral Answers to Questions — HEALTH

The Secretary of State was asked—

Waiting Lists

Mr. Owen Paterson: If he will make a statement on waiting times for surgery during the period from November 1999 to February 2000. [119054]

The Secretary of State for Health (Mr. Alan Milburn): Average waiting times for operations are now lower than when we came to office. The waiting list figures for December and January reflect the fact that, as planned, the national health service gave priority to emergency cases. Waiting lists fell again in February and we remain on track to achieve our manifesto commitment to reduce waiting lists by 100,000 from the level that we inherited.

Mr. Paterson: In February, the Secretary of State said that he would eat his hat if priorities in Shropshire were different from those in previous winters. Dr. Ian Rummens, secretary of the local medical committee, has written to me with numerous cases, some of which show that at times no beds at all were free in Shropshire this winter, even though there was less flu than usual. Even heart attack patients were turned away. Given this, will the Secretary of State please apologise, investigate these cases and go to a public place and eat his hat in penance?

Mr. Milburn: As I said to the hon. Gentleman at the time, I do not normally wear a hat—probably just as well. As for his allegation, he is simply wrong. He knows fine well that this year, just as in previous years, the NHS did the right thing. It put emergency cases first, and if that meant cancelling elective work that was the right thing to


do. It was not a distortion of clinical priorities, but the right clinical priorities. It is the hon. Gentleman who should withdraw his allegation, not the Government.

Fiona Mactaggart: I was pleased to welcome the Secretary of State to Wexham Park hospital in my constituency this morning. Will my right hon. Friend use this opportunity publicly to congratulate the hospital on reducing by 1,700 the number of people waiting over the past two years, and on ensuring that three quarters of patients are treated within three months? Can he keep giving that hospital the resources that will enable it to modernise and to continue its good work?

Mr. Milburn: I am very pleased to join my hon. Friend in welcoming the excellent work that is undertaken at Wexham Park hospital. I had the pleasure of visiting the hospital this morning with her and my right hon. Friend the Prime Minister. I pay tribute to the work that my hon. Friend does with the hospital and, indeed, with the local trust and the broader local health community. The hospital is achieving results on the basis of a clear foundation of partnership between clinicians and managers and on the basis of the extra resources that we are investing in the national health service. I give my hon. Friend this undertaking: we will continue to invest those resources year on year to give patients the sort of modern, dependable health care that they deserve.

Mrs. Caroline Spelman: What does the Secretary of State have to say to the widow of Bill Fox, who died, aged only 62, following a heart attack during the period referred to in this question? Sheffield health authority told him that there was no money to find the replacement for his outdated heart valve, but failed to warn him of the risk that such a delay might cause, or to give him the possibility of going privately, which might have saved his life.

Mr. Milburn: I say to the hon. Lady and to the gentleman's family that it is precisely because of those sort of cases that we place such priority on tackling coronary heart disease and improving access to heart surgery for patients when they need it. That is why we have already invested extra money to provide more heart operations—an extra 3,000 operations over the next few years. It is why, incidentally, we have provided Sheffield health authority with cash increases of more than 8.7 per cent. in this financial year alone.

Dr. Brian Iddon: I am pleased to tell my right hon. Friend that the ophthalmology department at the Royal Bolton hospital has become a centre of excellence. It could get its waiting list down even further and take on extra cases if it could get the theatre time. Will my right hon. Friend therefore look favourably on the bid that the trust has made for a designated theatre for eye operations?

Mr. Milburn: How could I resist? I shall look very closely at the bid that my hon. Friend's trust has submitted. It is very important to use all the capacity that is available to the NHS so that we can reduce waiting times for patients. We are getting the waiting lists down and, as we know, reducing waiting lists reduces waiting times too. In particular, we are prioritising operations that

are regarded by patients as urgent. Cataract operations are precisely those sort of operations. They are largely the operations of old age, and we are shortening the waiting times for them. Incidentally, they are the sort of operations that would be taken out of the NHS altogether if the Conservative party had its way.

Mr. Desmond Swayne: What estimate he has made of the number of patients who have left NHS waiting lists as a consequence of having paid for their treatment in the private health care sector since May 1997. [119055]

Mr. John Bercow: What proportion of the decline in NHS waiting lists he estimates is attributable to patients having secured treatment from the private health care sector since May 1997. [119068]

The Secretary of State for Health (Mr. Alan Milburn): The decision to seek treatment as a private patient, for whatever reason, is a matter for the individual. We have no data on the number of patients who have left NHS waiting lists and chosen to seek private treatment as an alternative.

Mr. Swayne: Let me give the Secretary of State some data. My constituent, Mr. Charles Scott, who lives in Hordle, suffered from atrial fibrillation for a number of years. In despair of the waiting list, and because his attacks were becoming more frequent and debilitating, Mr. Scott sank £12,000 of his savings into having a pacemaker fitted. Since then, he has received from Customs and Excise a demand for more than £1,000 in value added tax payable on his pacemaker. That cannot be right, or is it what is meant by Labour's double whammy?

Mr. Milburn: I remind the hon. Gentleman that it is not my party's policy to force patients to leave the NHS and pay for private treatment. That is, in fact, his party's policy. If he has a concern, he should take it up with the hon. Member for Woodspring (Dr. Fox), who told his party conference last October:
What we are starting is perhaps a Trojan horse for private medical insurance.
He went on to say:
I think what we are proposing could revolutionise private insurance in the way we revolutionised pensions in the 1980s.
And if that were not enough, he told The Sunday Times in January:
Philosophically we have moved on. Insurance companies could cover conditions that are not high-tech or expensive, like hip and knee replacements, and hernia and cataract operations, which currently involve long waiting times.
Those were not slips of the tongue, but the authentic voice of today's Conservative party. The Tories are condemned out of their own mouths. There is no use trying to deny that the hon. Member for Woodspring said those things. It is no use trying to close the stable door after that Trojan horse has bolted.

Mr. Bercow: Given that Austria, Finland, France, Germany, Greece, Italy, the Netherlands, Portugal, Spain and Sweden all spend proportionately more on health than we do, and given that a larger share of their expenditure derives from the private sector—often, indeed almost


ordinarily, voluntarily—why does the Secretary of State not understand that his refusal to contemplate a bigger private sector contribution is blinkered, irresponsible and a betrayal of the very patients whom he is paid to serve?

Mr. Milburn: I welcome the hon. Gentleman back from his break, which has obviously done him a power of good. There is a world of difference between the NHS paying the private sector to provide patients with care for free and the policy suggested by his party, which is that patients should be forced out of the NHS and should pay for their own care. That is precisely what the Tories advocate. The hon. Member for Woodspring advocates it, and so does the hon. Member for Buckingham (Mr. Bercow). However, he and his constituents should be aware that the operations that the Conservative Front-Bench team would take out of the NHS altogether are precisely those that involve old age—hips, knees, cataracts. Conservative policy amounts to a new tax on old age, and pensioners will reject it.

Angela Smith: Is the Secretary of State not astounded by the Conservative party's hypocrisy on the NHS? The Conservatives claim that they want the NHS to deal with serious, life-threatening illnesses, but they would force my constituents to have private operations. It may not mean much to Conservatives if they have to pay £5,500 for a hip operation, but that is far too much for my constituents to pay.

Mr. Milburn: My hon. Friend is absolutely right. The elderly are the very people who most need health care and can least afford private health insurance, yet it is their operations that the Conservatives want to force out of the NHS. Judge the Conservatives not only on their record—cuts in bed numbers, cuts in nurse numbers, cuts in NHS funding—but on what they promise for the future. They want treatment not according to clinical need, but according to ability to pay. The Conservatives offer patients only one guarantee for the NHS—an NHS that is not modernising, but privatising.

Mr. Barry Jones: Can my right hon. Friend say what the Government have done so far to hurry along surgery for knee and hip operations? Can ordinary people afford large sums for private surgery on their joints? What does he hope to do to help older people who cannot afford private surgery?

Mr. Milburn: We are trying to get waiting times down for precisely that sort of operation. Indeed, as we get the lists down, so waiting times go down too. It is obviously important that people do not have to wait, sometimes in pain and discomfort, for a long period before they receive treatment.
It is self-evident that people cannot afford to pay for such operations. The average cost of a hip replacement is between £5,000 and £7,800; the average cost of a knee replacement is between £5,700 and £8,400. If the Conservatives had their way, too many people—especially pensioners—would simply be priced out of care and treatment altogether.

Dr. Julian Lewis: Given that the Secretary of State's defence in this matter is that the service is giving priority to emergency cases, what does

he have to say to my constituent, Miss Kerry Wort of Totton, who, last December—at the very time he claims that emergency cases were being given priority—was told that she would have to wait 10 months for an emergency kidney operation, and that that wait would mean that she would lose the whole kidney, whereas if she could have had the operation sooner, she would save the kidney? She was, of course, forced off the list and had to use £5,000 of her own money to get the same operation from the same surgeon privately, three days later. If that is the Government's idea of emergencies receiving priority, they are not even delivering on that.

Mr. Milburn: It is precisely so that patients avoid the invidious choices that they are sometimes forced to make that we are trying to get down waiting times and waiting lists. We are doing that by investing more cash in the national health service and modernising the way that it works. I wish that the hon. Gentleman and his party would have the courage of their convictions. Before the Easter recess, the Opposition had the opportunity to back their apparent commitment to match our spending on the national health service by supporting our proposal to increase tobacco taxation and to earmark the proceeds for the NHS. At the very first test, they failed. They failed to put their money where their mouth is, because their commitment to the NHS is, I am afraid, not what it was in the past.

Dr. Phyllis Starkey: Last week, when I was canvassing, I met a constituent—an elderly woman—who had been forced into paying £7,000 for a hip replacement operation. However, my constituent was clear about who was most to blame for that—the Conservatives, for their previous underfunding of the NHS. Will my right hon. Friend confirm that the £800,000 allocated to Milton Keynes general hospital as its share of the extra money announced in the Budget to deal with waiting lists is a much more effective way of ensuring that no more of my constituents feel forced to go private than the Opposition's proposals?

Mr. Milburn: My hon. Friend is right. The extra resources that we have already committed to the NHS are allowing services to be modernised. They are a once-in-a-lifetime opportunity to speed up treatment and care for all patients in the NHS—not just some patients, but every patient. Nobody pretends that that is easy or that it can happen overnight; of course, it cannot—not least because we have to recruit the extra staff and build the extra capacity that the NHS needs. However, we have the opportunity to do that because the Government have put their money where their mouth is: we have backed our commitment with real cash. We have done that because we believe in the NHS. We believe that the NHS can work—it can be sustainable; it can modernise and can offer patients the fast and convenient services that they want in the 21st century.
We shall continue to invest resources in the NHS precisely because we believe in its ability to deliver the goods. What we have invested is the biggest increase in resources that the NHS has ever seen. I remind my hon. Friend that, over the past 20 or 30 years, the NHS saw real-terms increases in funding of about 3 per cent. on average. That is the record of the Tories in office. Over the next four or five years, we shall be doubling that


investment record. With that investment, the NHS has to change and modernise—there has to be a step change in results to match that step change in resources.

Nurses

Mr. Michael Jack: What data his Department receives from hospital trusts on the number of nurses each employs. [119056]

The Minister of State, Department of Health (Mr. John Denham): The Department receives information from national health service trusts on all nurses employed as part of the annual non-medical work force census. The census contains details of area of work, hours worked, age, gender and ethnicity. Data of that sort enable us to know that, in the year until last September, the number of nurses employed by the national health service increased by 5,580.

Mr. Jack: I thank the Minister for that information, but it is a great pity that some of the nurse numbers that he mentioned have not made their way to the Blackpool Victoria hospital, which has, since 1997, been struggling with a shortage of nurses. Thankfully, it appears that that problem is being solved, but in making its case for greater nurse numbers, the trust had difficulty in obtaining comparative benchmark nurse numbers from other local hospitals to help it to make its case to the North West Lancashire health authority to ensure that nurse numbers and activity moved upwards together. What assurances can the Minister give me that that problem will not occur again?

Mr. Denham: The right hon. Gentleman says, rightly, that the problem is being tackled. Indeed, as the House meets, a meeting is taking place between Blackpool Victoria hospital and the health authority to consider nursing numbers, and I understand that there are proposals for additional funds for additional nurses to meet that hospital's needs.
The right hon. Gentleman asks for an assurance that the problem will not occur again. One thing that makes that possible is the fact that the health authority has received a 6.23 per cent. real-terms increase in finances for the coming year—part of the record level of additional resources that my right hon. Friend the Secretary of State mentioned. It is that, together with the fact that we have increased the number of nurses in training where the Conservative party cut them, that makes it possible to address the need for nurses in NHS hospitals.

Mr. Nick Harvey: Understandably, the Government are claiming to have brought more nurses back into the profession, which is very welcome, but are they not concerned that there are still nearly 15,000 vacancies? As they look forward to the future, are they not concerned that things might get considerably worse before they get better, given the new emphasis that they have been placing on intermediate care and caring for people in the community? Are they not concerned that the age profile of community nurses, occupational therapists and health visitors—some of the very professions on whom the burden of caring for people outside hospitals will fall—is very top-heavy, and that there will be a real problem of recruitment in those areas in the next

few years? What further steps will the Government take to increase dramatically the number of nurses entering the profession and to reform the pay and conditions to keep the people who are already there?

Mr. Denham: The work force needs of the new, modern national health service is one of the key issues to be addressed by the modernisation action teams set up by the Prime Minister following the Budget announcement. They will obviously address the numbers of staff that we need and the expanded roles that we want nurses and other health professionals to take on board.
However, may I remind the hon. Gentleman of what we have already achieved? We inherited a difficult situation. The previous Government cut the number of nurses in training. As a result, there were about 15,000 fewer nurses available to recruit than there otherwise would have been.
The number of hard-to-fill vacancies—those that have been empty for more than three months—is about 7,000. Against that background, we got more than 5,500 extra nurses back into the national health service last year; we were able to attract more than 5,000 new nurses who were qualified but not nursing, either straight back into the national health service or into return-to-practice courses. There was a 73 per cent. increase in applications for nurse training courses last year.
All those figures show that, although there are challenges ahead, we have begun to turn the corner on the problem of nurse shortages, which has bedevilled the national health service for so long.

Mr. William Ross: The Secretary of State said earlier that it was essential to use national health service capacity to the full. Does he agree that one of the great bottlenecks is the shortage of nurses trained for intensive care, because that ties up an awful lot of people in bed blocking when they should be out and about?

Mr. Denham: The hon. Gentleman is absolutely right. We did increase the number of critical care beds last winter, but there was still significant pressure on the national health service. I believe that the national health service, and the trusts and hospitals within it, know that we need to do more to address that problem in the coming winter. Obviously, one of the issues that the health service is now looking at actively throughout the country is the need to ensure that we have more trained intensive care nurses.

Patient Representation

Mr. Syd Rapson: What steps he is taking to strengthen the system for representation of patients' views in the NHS. [119057]

The Parliamentary Under-Secretary of State for Health (Ms Gisela Stuart): The patient care empowerment modernisation action team and the wider consultation exercise with patients and the public on the national plan will develop and strengthen the representation of patients' views in the national health service.

Mr. Rapson: We have excellent hospitals in Portsmouth, but concerns have been expressed to me,


mainly by elderly patients. They need more care, and extra effort must be made to ensure that they understand their rights. There is some confusion, so will the Minister make that extra effort to ensure that elderly patients and organisations that support them, such as Age Concern, understand their rights?

Ms Stuart: We are committed to developing a service that is sensitive to patients' needs. As part of the national plan development, we shall consult regionally and locally and ensure that all representative groups have an opportunity to comment and feed in their opinions. In addition, the action teams have considerable patient representation, which we hope will cover the whole spectrum of needs. We shall, of course, pay particular attention to the needs of the elderly within that framework.

Mr. Peter Lilley: Is not the best means of representing patients' views the right of their GP to refer them to the hospital of their choice? Why, therefore, have the Government effectively curtailed that right, and not even mentioned it in the circular on out-of-area treatments? What is the Minister's response to the president of the Royal College of Surgeons who, in last week's New Statesman, said:
It is terribly important that a GP can refer to the appropriate specialist centre. Yet the new system…makes that more difficult. That is very disappointing and not right for the highest standards of patient care…?

Ms Stuart: I do not agree that the right of GPs to make referrals has been restricted in a way that will adversely affect patients' treatment. It is absolutely important that we end up with a system in which patients see the right doctor at the right time in the right place, and many of the modernisation programmes are geared towards that. That means that there must be some reconfiguration of services, but I do not agree that the system of GP referral is in any way under threat.

Mrs. Eileen Gordon: Will my hon. Friend join me in congratulating community health councils on the work that they do to represent patients and inform them of their rights? Does she agree that with more resources they could do much more work and represent many more patients?

Ms Stuart: Community health councils have an important statutory function, but some groups of patients and parts of the community may not have a sufficiently well-structured input into service reconfiguration. We are keen to broaden that base and to involve the community health councils. We want to build on the model of CHCs in certain areas that have been very innovative, and we should recognise their role in involving the local community and build on that success.

Dr. Liam Fox: Given that one of the roles of the House is to ensure that the rights of the weakest and most vulnerable are protected, what specific plans does the Minister have to improve representation for the mentally ill? In the light of yesterday's announcement, what specific ideas do Ministers have about advocacy for the elderly in the health care system?

Ms Stuart: It is, of course, extremely important that the most vulnerable have the greatest protection.

The advocacy system is being examined as part of the national plan for development of patient empowerment, which can mean empowering individual patients themselves or their carers or those who speak for the patient. That remit also includes the mentally ill.

Dr. Fox: The Minister might like to write to me with a fuller answer, which can be put in the Library, as this issue is obviously important to hon. Members on both sides of the House. I welcome yesterday's announcement and the Government's conversion to a public-private partnership in rehabilitation of the elderly, but what representations can patients make in such a system of treatment, and what say will they have? What safeguards will be put in place to guarantee minimum standards of care? Given that NHS treatments are subject to the Commission for Health Improvement, what changes will be required to the Care Standards Bill as a result?

Ms Stuart: The hon. Gentleman's question rightly covers a range of issues, which I shall take one by one. Mental health patients will be taken much more into care. We have spent an extra £100,000 on NHS Direct for a special line for mental health service patients. The Care Standards Bill will strengthen services within the social care sector. As for evidence of greater involvement, I ask the hon. Gentleman to wait for the national plan, which will shortly be published. It will refer to real actions rather than aspirations.

Mr. Peter L. Pike: A few moments ago, my hon. Friend referred to the important work of community health councils. Will the Government ensure that the councils can represent patients' views at local level? It is essential that they remain local and do not become remote, which is what the previous Government were threatening.

Ms Stuart: It is absolutely essential that representation and consultation always take place at local level. That is why we are strengthening the role of health authorities and considering closely ways of broadening the base of that representation, which may not always be through the community health councils. The councils play a vital statutory role and we are committed to widening their base, but always with a focus on local delivery and local input to serve local patients.

In Vitro Fertilisation

Mr. Bob Russell: What steps he is taking to ensure that IVF treatment is available throughout the country. [119058]

The Parliamentary Under-Secretary of State for Health (Yvette Cooper): The decision to provide specialised infertility treatment is one for individual health authorities. This decision should be taken in the light of local needs, available resources and clinical effectiveness.
The Government are continuing to consider ways of providing fairer access to infertility services while ensuring that resources are not diverted from the key priorities of cancer, coronary heart disease and mental health.

Mr. Russell: With that answer the Minister confirms that postcoding exists when it comes to this form of


treatment. Does she agree that that is unfair on a couple in my constituency—hence my question—who are being deprived of the service, whereas if they lived in another part of the country, it would be available to them? Surely the Government should insist on fairness throughout the country. We must end postcoding.

Yvette Cooper: We are very concerned about the postcode lottery in care, which is a legacy from the previous Government. The internal market perpetuated a postcode lottery and a money lottery. We are taking action to tackle the postcode lottery, including setting up the National Institute for Clinical Excellence and the Commission for Health Improvement and referring important cancer drugs to NICE. We shall build on this in future. We shall publish shortly a survey of IVF provision throughout the country to inform local decision making.

Funding Formula

Mr. Tony Lloyd: What plans he has to review the formula for distribution of funding between health regions and individual health authorities to take account of the impact of poverty on health. [119059]

The Minister of State, Department of Health (Mr. John Hutton): On 24 March 1999, my right hon. Friend asked the Advisory Committee on Resource Allocation to undertake a wide-ranging review of national health service resource allocation.
The review of the formula will ensure that the health care needs of populations, including the impact of deprivation, will be the driving force in determining future health allocations. We want a fairer formula that contributes to our goal of reducing health inequalities.

Mr. Lloyd: I think that it is common knowledge that people in constituencies and cities such as mine are among the poorest in the country. As a result, they live shorter lives, which are punctuated by more frequent episodes of ill health. Does my hon. Friend agree that the last thing that my constituents need is another Conservative Government, who would widen the gap between the poor and the better off, and would ask my poor constituents to pay for health care? Does he agree also that the time for redistribution to ensure that health funding matches health need is now, when the Government are putting record sums of money into the health service? That process would make things much easier for everybody else.

Mr. Hutton: I strongly agree with my hon. Friend. There is little doubt that it would be a disaster for the people of Manchester if the Conservatives were ever returned to office to implement the policies that they are proposing for the national health service. We should not forget that the Tories found it impossible to use the two words "health inequalities". We recognise that there are serious health inequalities in our society, which continue to scar communities throughout the country, including those in Manchester. My hon. Friend will be aware that, thanks to the measures that we have taken this year, an additional £30 million is going into the NHS in Manchester. In addition, Manchester is a health action zone, which is being supported by nearly £12 million

of additional resources. His constituents face serious challenges. We are determined to rise to them, but the Conservative party would not.

Mr. Crispin Blunt: Does the Minister appreciate that some of the longest waiting lists are in Surrey, where the length of the waiting lists has led to the effective dismissal of the chief executive of the East Surrey hospital for her political failure to meet, within the resources made available to her, the political targets imposed on her? When reconsidering the formula, should the Minister not bear in mind that the effective increase in Surrey will be less than 2 per cent. in real terms? Therefore, there is no confidence in Surrey that the money made available to Isobel Gowan's successor as chief executive will be sufficient for him to be able to carry out the task that the Government have set him.

Mr. Hutton: The hon. Gentleman usually does his homework meticulously, but I am afraid that he has not done so on this occasion, if he wants to check allocations to the East Surrey health authority for this year, he will find that it will have a cash increase of 8.26 per cent., which is a real-terms increase of 5.62 per cent. Uncharacteristically, he is quite wrong about these matters. This Government, unlike the one whom he supported, are determined to ensure that we have a genuine national health service that provides high-quality care right across the country. That, I am afraid, was not the legacy that we inherited from the previous Administration.

Helen Jones: Will my hon. Friend bear in mind that there are inequalities in health care not only in inner cities, but in constituencies such as mine where people in wards such as Bewsey, Poplars and Hulme suffer much higher rates of debilitating long-term illnesses than the areas that surround them? Will he also bear in mind that people in such wards have never been able to buy private health care because they simply could not afford to? That is why the private wing in the grounds of Warrington hospital went bust. When he considers future allocations, will he ensure that the areas that I have mentioned receive their fair share of resources, which they were denied during 18 years of Tory Government? Will he look favourably on the application of Warrington hospital to use the Daresbury wing to provide orthopaedic facilities for all the people of Warrington and not just for those who can afford to pay for them?

Mr. Hutton: We shall certainly consider that, and I agree with my hon. Friend about many of the points that she made. I tried to emphasise that we want a system that guarantees fairer funding right across the national health service, which was not the case with the arrangements left in place by the previous Administration. She is right to draw attention to deprivation and health inequalities in her constituency and such problems are found all over the country. Unlike our predecessors, we are determined to ensure that the NHS provides high-quality care and improves at a faster rate the health of those who live in the poorest and most deprived parts of the country.

New Opportunities Fund

Mr. Andrew Robathan: How much of the £150 million committed from the new opportunities fund to combat cancer has been distributed. [119060]

The Parliamentary Under-Secretary of State for Health (Yvette Cooper): Some £116.25 million from the new opportunities fund has been made available for cancer services in England and £93 million of that has already been allocated across the country for new cancer equipment. A further £23.25 million will be spent on palliative care and support and information services. Successful applicants for this money will be announced in September 2000.

Mr. Robathan: Does not the Minister, in her heart, agree that state health care should be funded by Government money and not by lottery money? However, is she aware that, if we are to have such funding, although that £150 million was trumpeted with fanfares and welcomed by the Prime Minister and the previous Secretary of State for Health, Leicestershire health authority is having to make a bid for a health care initiative for disadvantaged communities? Would it not be better to provide a CT scanner that would benefit all the people of Leicestershire than to have such gimmicks?

Yvette Cooper: I strongly agree with the way in which the new opportunities fund is being spent, and I think that the people of Britain also agree. They would certainly far rather have the money spent on important cancer equipment than on the Churchill papers. I am proud that the money for palliative care is being spent on disadvantaged communities, because this Government, unlike the previous one, are committed to tackling health inequalities and the unfair lottery of care across the country.

Mr. Philip Hammond: Is the Minister aware that the director general of the Cancer Research Campaign will give evidence to the Select Committee on Science and Technology tomorrow that the use of Temodal, the revolutionary brain cancer drug developed by Cancer Research Campaign's own scientists here in Britain, is eight times higher in Germany than in Britain, five times higher in Italy, three times higher in France and twice as high in Spain and Greece? Against the backdrop of the Government's rhetoric of priority to cancer services, does the Minister consider it acceptable that a world-class cancer drug developed in Britain with voluntary contributions made by the British people should be freely available in other EU countries, but available to only one in four of British patients who could benefit from it?

Yvette Cooper: We take seriously the lottery of care across the country with regard to cancer drugs, which is why we referred the taxanes to NICE as a matter of early priority. We will shortly make an announcement about the next wave of cancer drugs to be referred to NICE, and Temodal will be one of those drugs.

Medical Laboratory Staff (Pay)

Mr. Hilary Benn: If he will make a statement on the pay of medical laboratory staff working in hospitals. [119061]

The Minister of State, Department of Health (Mr. John Denham): For the first time, we have offered all medical laboratory scientific officers—MLSOs—a guarantee of rises above projected underlying inflation, not just for one year, but for three years. In addition, trainees have been offered increases of up to 26 per cent. for last year, all MLSOls have been offered 7.1 per cent., and we have offered to increase the minimum national starting pay for MLSO2s by 7.1 per cent. If accepted, all that would be backdated to 1 April 1999. We are also discussing positively with the NHS trade unions proposals to reform and modernise NHS pay, as we outlined last year in "Agenda for Change".

Mr. Benn: When I recently visited the pathology laboratories at St. James's hospital in my constituency, I met staff there who are committed to the work that they are doing, but concerned about the reward that they receive for that job, and about the difficulties that they face in recruiting adequate staff. I welcome the step that the Government have taken to recognise that problem through "Agenda for Change". Can my hon. Friend tell the House how soon he expects proposals to be forthcoming so that those staff, a vital group of backroom staff in the NHS, receive the reward that they feel is long overdue?

Mr. Denham: We are making good progress with the NHS trade unions, and I hope that we continue to do so. We hope to reach broad agreement about how the proposals would be implemented this summer or later this year. They would then have to be implemented effectively and properly by NHS employers throughout the country. On our side, we are determined to make good progress with the trade unions and, with good will on their side, I am sure that we can do that.

Sir Sydney Chapman: I welcome the Minister's announcement today. Does he accept that there is still a pretty wide disparity in pay between medical laboratory staff and other professionals in the NHS, particularly after four years' service, when the disparity is about £4,000? Does he agree that there is an overwhelming case for medical laboratory staff to be included in pay review body reports?

Mr. Denham: As I should have said earlier, I pay tribute to the work done by all our medical laboratory staff, to whom hon. Members on both sides have referred. They do a tremendous job and are a key part of the health team. With regard to the disparity in salaries between those jobs and other professions, any existing disparities certainly did not begin to emerge over the past three years, but are a much more long-standing part of the pay system. It is possible, and it is envisaged in "Agenda for Change", that some professional staff groups might become members of the pay review body system. It is too early in the process to have reached agreement on which groups those might be. That is part of the overall package of


measures that we are negotiating under "Agenda for Change" and on which we are keen to make progress in the next few months.

Dr. Liam Fox: The Minister knows that there is a crisis of confidence in the laboratory service and a major problem with recruitment and retention. Why will he not give the simple undertaking, which the Conservative party is happy to provide, that in future all medical laboratory staff will be included in the full pay review structure?

Mr. Denham: The hon. Gentleman is unbelievable. His party was in power for 18 years and had the opportunity to implement his proposal. That the hon. Gentleman makes such a suggestion without prior notice or discussion shows that nothing that he says can be taken seriously. We have made it clear that some professional groups can join the review bodies. However, that needs to be part of a negotiated package of changes to the national health service pay system, which will benefit not only staff but patients. The hon. Gentleman's proposal to announce one part of the negotiation as Opposition policy is not credible. He shows no understanding of what is necessary to provide a modern pay system for the national health service.

Osteoporosis

Mr. Dafydd Wigley: What steps he is taking to improve facilities for identifying and treating those suffering from osteoporosis. [119063]

The Parliamentary Under-Secretary of State for Health (Ms Gisela Stuart): The Government take osteoporosis very seriously. Significant progress has been made in highlighting the importance of preventing osteoporosis and resulting fractures since the launch of the national strategy in June 1998. That provides a solid foundation for health authorities to develop local strategies. The Government expect to publish the national service framework for older people in the autumn. That will focus on areas of greatest concern to older people including falls and fractures partly in the context of osteoporosis.

Mr. Wigley: I thank the Minister for that hopeful answer. The cost of osteoporosis amounts to £4 million a day because of fractures. Will the Government provide specific funding for primary care groups to manage osteoporosis, especially for elderly people?

Ms Stuart: The causes and treatments of osteoporosis are complex. Medical conditions that result from osteoporosis, such as fractures, are fully funded and treated by the national health service. Several health authorities have adopted a strategy for prevention. Primary care trusts will continue to receive basic guidelines, which will be taken up with more enthusiasm in some areas than in others. To be frank, the response in some areas has not been as encouraging as we would wish.
It is important to note that the Care Standards Bill will set minimum standards in all care homes because elderly people are most at risk. Those standards have not yet been defined, but the consultation document, "Fit for

the Future", makes it clear that facilities such as grab rails should be provided in homes. For the first time, minimum standards will apply throughout the country in homes, which house many of those most at risk.

Mr. Tam Dalyell: The Minister has been candid. Why do differences exist in the response to the serious matter of osteoporosis in various parts of country?

Ms Stuart: When local health authorities decide priorities, prevention of osteoporosis may be higher on the agenda in some areas than in others. However, the national health service framework for the elderly and the Care Standards Bill will highlight osteoporosis and prevention. Prevention is a long-term issue, and our strategy includes work on better nutrition because vitamin D deficiencies and an unhealthy life style can cause osteoporosis. Health action zones have taken up those matters, and we are dealing with the differences in several ways.

Miss Anne McIntosh: The Minister rightly referred to the importance of prevention of osteoporosis. Has she had time during the recess to assess the evidence that shows that light gardening by the over-50s can prevent the onset of osteoporosis?

Ms Stuart: If the hon. Lady wants me to support gardening and exercise in the open air as measures to prevent osteoporosis, I am more than happy to do so.

Breast Cancer Unit, Nottingham

Mr. Vernon Coaker: What discussions he has had with Trent regional health authority about the building of a new breast cancer unit at Nottingham City hospital. [119064]

The Parliamentary Under-Secretary of State for Health (Yvette Cooper): The national health service executive's Trent regional office is working with Nottingham City Hospital NHS trust to take forward its proposal for a new breast care centre. The case is considered to be of high priority by both the regional office and the Nottingham health community. The project will be considered by Ministers, along with other priorities, when the capital allocations for the next year are announced shortly.

Mr. Coaker: Is the Minister aware that the development of a new breast cancer unit at Nottingham City hospital is a huge local priority? I have visited the breast cancer unit and the work of Professor Blamey, Dr. Robin Wilson and the staff is well appreciated by the local community, but for too long they have had to work in substandard accommodation. With the extra money that we have made available, there are high hopes that they will soon have the first-class accommodation and facilities that they should expect for the first-class service and professionalism that they provide at the hospital.

Yvette Cooper: I shall certainly take on board the points that my hon. Friend makes. He has been a strong advocate for the new breast care centre and I can tell him


that the regional office and Ministers will note his argument that it is considered to be a regional priority. We shall bear what he says in mind when we make a decision.

Domiciliary Care Agencies

Mrs. Sylvia Heal: If he will make a statement on his plans to regulate and inspect domiciliary care agencies. [119065]

The Minister of State, Department of Health (Mr. John Hutton): The Care Standards Bill will introduce a new regulatory framework for home care services. We have amended it to ensure that all domiciliary care agencies—not only those contracting with local authorities—will be required to register and be inspected annually by the National Care Standards Commission. A consultation version of the proposed regulations and standards will be published later this year.

Mrs. Heal: I welcome what my hon. Friend says about including all domiciliary care agencies in the proposed regulations, but can he provide an assurance on domiciliary care workers in particular, many of whom do an excellent job, provide a high standard of care and enable people to remain in their homes, which is usually their choice? Sadly, there have been cases of care workers abusing or taking advantage of the people for whom they care. Will the regulations take into account not only quality of service, but the recruitment and training of staff employed by the agency?

Mr. Hutton: I can give my hon. Friend that assurance and she is right to say that enabling more people to stay longer at home is one of the principal objectives that we have set for social services. If we are to succeed, we need higher-quality domiciliary care services. A key part of that is making sure that the right people with the right training and the right supervision are employed in domiciliary care agencies. I give her an absolute assurance that, as we develop those new national standards, we will put a premium on ensuring that domiciliary care workers are properly vetted, trained and supervised in future.

Mr. Paul Burstow: During the drafting of the domiciliary care regulations, will the Minister consider the difficulties that many private sector providers of such services face with the contracts and spot contracts that they are being given by local authorities? They are set at such unrealistically low prices that even now they find it difficult to provide a quality service: we know that many are leaving the residential sector and are beginning to abandon the provision of services at home. Insufficient resources are being allocated to guarantee the quality that he and I both want to be provided.

Mr. Hutton: I will consider the point that the hon. Gentleman raises, but I remind him that social services are being resourced at a record level. There is a significant increase year on year—more than twice the rate of inflation is going in—but how local authorities decide to use those additional resources and the rates at which they contract are matters for them. We have made it clear that we do not want rates to be set mechanistically, but we will look into those issues. I am sure he agrees that we

need high-quality domiciliary care and residential care services and we expect local authorities to make sure that those services are available locally.

Poverty and Heart Disease

Mr. Bill Michie: What assessment he has made of the nature of the relationship between poverty and heart disease. [119066]

The Secretary of State for Health (Mr. Alan Milburn): Poverty is a major cause of heart disease. The poorest working-age men are 50 per cent. more likely to die of coronary heart disease than men in the overall population. That is why one of the key objectives of our new national service framework for heart disease is to tackle inequalities in the incidence of the disease, and access to services dealing with it.

Mr. Michie: I thank my right hon. Friend for his reply. We are now more hopeful that we will get to the bottom of illnesses caused by poverty, particularly heart disease. Does my right hon. Friend think that health action zones will give information on the relationship between heart disease and poverty? By the way, the Sheffield hospital for women is on song, on target and on price.

Mr. Milburn: As always, my hon. Friend brings good news.
My hon. Friend mentioned coronary heart disease and the role of the health action zones. I can tell him that we consider dealing with the real problems that are intimately linked with deprivation—not just coronary heart disease, but cancer—to be one of the top priorities for those zones. I know that the local health improvement programme in Sheffield has prioritised the tackling of coronary heart disease, and I think that that is absolutely right.
We are providing better treatment through extra operations, the fast-track chest pain clinics that are coming on line, and faster ambulance response times enabling those who have heart attacks to get to hospital and be treated more quickly. We need, however, to emphasise the importance of prevention as well as treatment. That is why we have invested significant amounts in smoking cessation clinics, and in the provision of nicotine replacement therapy on the national health service. For the first time, that therapy will be available free of charge. We have enabled some of the problems to be dealt with at source, rather than being picked up when they occur.

Mr. John Wilkinson: The Secretary of State has identified a disturbing connection between poverty and the high incidence of heart disease. How can he justify the proposed closure of Harefield hospital in my constituency, which caused a petition with 100,000 signatures to be lodged at Downing street last Wednesday, and gave rise to a procession led by an eight-year-old former patient who had been given a double transplant? Does not a hospital such as Harefield—unlike one in central London such as the Paddington hospital that is proposed for the future—offer an ideal location for poorer people? Their families—


and they, as out-patients—can stay, at a reasonable price, in an accessible area. Harefield is the ideal locational hospital. Will the Secretary of State think again?

Mr. Milburn: I think the hon. Gentleman knows that consultation is still taking place on the future configuration of acute hospital services in that part of London. Let me place on record my tribute to the part played by the hon. Gentleman's right hon. and noble Friend Lord Newton in leading some of the discussions about the best make-up of hospital services in the area. I can go no further than that today, but I will consider carefully the concern expressed by the hon. Gentleman and others.

Mixed-sex Wards

Mr. Tim Loughton: What additional funding is being made available to health authorities in the south-east of England to facilitate the ending of mixed-sex wards. [119067]

The Parliamentary Under-Secretary of State for Health (Ms Gisela Stuart): Nationally, we are aiming to invest a total of £2.6 billion in NHS buildings and equipment for this year, part of which will be used to address on-going work to eliminate mixed-sex accommodation. The south-east received about £191 million of the £1.9 billion allocated so far. Of that, about £4 million will be specifically invested this year to help to eliminate mixed-sex wards.

Mr. Loughton: In August 1997, Lady Jay threatened:
Any health authority which tells me it is unable to get rid of mixed sex accommodation within the next two years will have to have a very good reason.
What is the reason for the Government's failure to meet their initial pledge to phase out mixed-sex wards within two years?

Ms Stuart: Unlike the previous Government, who expressed the intention of phasing out mixed-sex wards, but never set any targets or introduced any monitoring to establish what was happening on the ground, we have set

the target of eliminating the number of such wards by 95 per cent. by 2002. There is no reason to assume that we will not meet those targets. We could not set a target of 100 per cent., because, as the hon. Gentleman will know, major capital projects involving huge investment and rebuilding in five hospitals in his area mean that that target must be met slightly later, which is right and appropriate. However, the 95 per cent. target—progress on which we are monitoring, and can prove—still stands, and we will meet it.

Drug Rehabilitation Programmes

Ms Karen Buck: What action he is taking to improve the delivery of drug rehabilitation programmes. [119070]

The Parliamentary Under-Secretary of State for Health (Yvette Cooper): Action to tackle drug abuse is one of the key issues set out in the national priorities guidance for health authorities, which was issued last year. Drug rehabilitation forms part of our cross-government strategy on drug abuse. Better performance management and guidance on optimum models of care will ensure that more people get into treatment that really works, including residential rehabilitation. We are backing that with extra resources.

Ms Buck: I thank my hon. Friend for that answer. Does she agree that one of the principal barriers to the effective working of drug rehabilitation units is the acute shortage of trained and experienced drug rehabilitation workers? What action are the Government taking to deal with the shortage of staff throughout the country, but particularly in some of our inner-city communities?

Yvette Cooper: My hon. Friend is right. We are giving £70 million of additional resources to health authorities and local authorities over the coming three years, in addition to developing the national guidance to improve capacity, but one of the key issues is the work force, which is why we have launched a national recruitment campaign aimed at those who are not involved in drug treatment work. So far, we have received an extremely strong response.

Demonstrations (London and Manchester)

The Secretary of State for the Home Department (Mr. Jack Straw): Madam Speaker, with permission I should like to make a statement on the violence and disorder associated with the so-called anti-capitalist demonstrations over the bank holiday weekend in London and Manchester.
Yesterday's shameful violence was the culmination of a loosely organised series of events that took place from Friday to Monday. Although all the events were broadly described as protests against capitalism, they were organised by a number of wholly disparate groups.
None of the organisers was willing to discuss preparations in advance with the police, who therefore had to make their plans on the basis of the best information obtained by them. The police response in London was a joint operation conducted by the Metropolitan police service, the City of London police and the British Transport police, using a joint command structure based in New Scotland Yard.
The events held by protesters on Friday, Saturday and Sunday passed off relatively peacefully, both in London and in other centres. As had been expected, however, the main challenge to public order occurred yesterday. In Manchester, up to 400 protesters caused damage to shops and disruption to the tram system. Twenty arrests were made.
The protests in central London began at around 10 am when about 500 cyclists made their way to Parliament square from Hyde Park corner. By 11 am, about 2,000 protesters were in Parliament square, many of them engaged in digging up the turf.
The first incidents of violence were reported at about 12.25 pm, when police and private vehicles were attacked by protesters close to Parliament square. About an hour later, 1,000 or so people moved into Whitehall from Parliament square and demonstrated outside Downing street, when missiles were thrown at police guarding the barriers. It was at around that time, I understand, that vandals desecrated the Cenotaph and defaced the statue of Sir Winston Churchill. [HON. MEMBERS: "Disgraceful."]
Shortly after 2 pm, the Whitehall branch of McDonald's was attacked by a crowd of about 80 people. Some injuries to the police were sustained, as was serious damage to the premises.
At about 3.15 pm, there was serious disorder and violence in Trafalgar square, including the throwing of missiles at the police. At that point, police in riot gear moved to control and to contain the crowds in the square, which they continued to do for the rest of the afternoon.
Separately, about 500 demonstrators crossed the river and congregated in Kennington park, about a mile south, where missile attacks were made on the police. From about 6.20 pm, police began a controlled dispersal of the crowd remaining in Trafalgar square. At around that time, about 150 protesters attacked commercial premises and vehicles, including police vehicles, in the Strand. The crowds in Kennington park were dispersed by 8.30 pm, and a crowd off Waterloo bridge, where protesters in the Strand and Trafalgar square had gone, was held at bay and finally dispersed by the police just before 9 pm.
I regret to tell the House that nine police officers were injured, including one who was struck in the face by a brick. He was taken to hospital but, thankfully, there was no need to detain him. I understand that the police are aware of injuries to nine members of the public. Thankfully, those injuries were, I understand, all minor.
I am informed by the Commissioner of Police of the Metropolis that 97 people were arrested in the course of yesterday's events on charges including public order offences and assault. A major investigation by police to detect other offenders—including the perpetrators of the desecration of the Cenotaph and the defacement of the memorial to Sir Winston Churchill—is already under way.
Everyone in our democracy has a right to demonstrate peacefully, but no one has a right to demonstrate violently. Yesterday, there was a peaceful demonstration in London by more than 2,000 people: it was organised by the Trades Union Congress to commemorate international workers day and to campaign for the saving of jobs at Rover's Longbridge plant and elsewhere in the west midlands. However, those entirely peaceful demonstrators were physically denied their right to use Trafalgar square, as they had arranged, because of the mindless violence of the groups that were by then occupying the square.
What was witnessed yesterday in central London was criminality and thuggery masquerading as political protest. In our democracy, there is neither reason nor excuse for such appalling behaviour.
As the House has already indicated, a particularly shocking aspect of yesterday's events was the defacing of the statue of Sir Winston Churchill in Parliament square, and the desecration of the Cenotaph in Whitehall. Yet without the sacrifice of the millions who gave their lives in the service of this country to defend our freedoms, no one yesterday would have been enjoying any right to protest at all.
The fact that the statue of Sir Winston Churchill has already been cleaned up and, I am told, no lasting damage has been caused to the Cenotaph is of little comfort to the public for the huge affront caused by that vandalism. It will be of little comfort especially, but by no means exclusively, to those ex-service people who served and saw comrades killed in those wars.
Planning by police for the weekend's events occurred over many months and took account of all the contingencies that they could identify. The planning also took into account the lessons learned from the very serious violence that occurred in the City of London in June 1999.
The police devoted greater resources—5,500 officers—to yesterday's situation than they have done for any comparable situation in the past 30 years. Knowing the determination of some of those involved to perpetrate serious violence and disorder, the police had to make the fine judgment that it was better to contain the trouble—as they did—in confined areas than seek to bar people from those areas, with a high risk of wholly unpredictable outbreaks of even more serious violence affecting the public as well as the police and property virtually anywhere else in central London. Police had to make equally fine judgments on precisely when and where to deploy officers in riot gear.
In our system of policing, those decisions are properly ones made by chief officers of police. For the avoidance of any doubt, I make it clear that that will continue to


be the situation in Greater London after the mayor, the Assembly and the Metropolitan Police Authority have come into office on 2 July.
I should like, however, to tell the House that the Commissioner had and has my full support and confidence in respect of the very difficult decisions that he and his colleagues had to take. As with any large policing operation, the Commissioner will be reviewing what happened yesterday and will be discussing those matters with me. I shall of course be ready to respond to any recommendations that he or his fellow chief officers make to me.
I am sure that I speak for the whole House in offering our thanks and gratitude to all those police officers in Greater Manchester and in London who dealt so professionally, diligently and courageously with the entirely inexcusable violence that occurred yesterday.

Miss Ann Widdecombe: I thank the Secretary of State for his statement and for his customary courtesy in letting me see it in advance. I should also like to associate the Opposition with his tribute to the police involved. I also add our best wishes to those innocent members of the public who were injured in yesterday's demonstrations.
I remind the Home Secretary of the letter that I wrote to him at the end of last week. In the second paragraph, I said:
I would he most grateful if you would state categorically that the Metropolitan Police will actively seek to protect both people and property once the protests begin and not, as some have suggested, allow illegal acts to be committed in order to contain the situation.
I acknowledge that fine judgments have to be made, but the Home Secretary will be aware that there is considerable public concern about the amount of activity and disorder that was allowed to take place before the police decided that it was the proper time for intervention. Did he have any discussions with the police about the proposed policing methods, including, for example, at his regular meetings with the head of the Metropolitan police? Many people will be perturbed by the contrast between the policing methods used during the visit of the Chinese President, when the mildest demonstration was restrained, and what happened yesterday, when there was considerable restraint before intervention took place.
Did English Heritage make any proposals to safeguard the Cenotaph before the demonstrations? If so, what consideration was given to those proposals? If they were rejected, why and on whose advice and authority?
Does the Home Secretary agree that all those who are charged with offences arising from yesterday's activity should face exemplary sentences? Does he agree with the proposal of the Conservative candidate for the London mayoralty, Steve Norris, who has called for a ban on that assembly in future years, given its record this year and last year; or does he incline more towards the views of the other candidate for the mayoralty and think that the reaction of the Livingstone camp to last year's City riots is nearer the mark? It is a straightforward question: does the Home Secretary agree with the Conservatives and Steve Norris that the demonstration should be banned in future?
When will the Home Secretary be ready to give us an assessment of the cost of yesterday's operation? Has he made any provisional estimates? Does he agree that any

information held by anyone that would assist with the identification of persons not yet arrested, including film taken by broadcasters and members of the press who were present, should be made available to the police immediately? Would the groups concerned with yesterday's disorder be covered by his new definition of terrorists under his new terrorism legislation?

Mr. Straw: I thank the right hon. Lady for her good wishes to those who were injured and to the police officers who policed such a difficult demonstration. She acknowledges in passing that fine judgments have to be made about the policing of demonstrations, but she then suggests that, with the benefit of hindsight, she is in a better position to make judgments than the chief officer of police was. [Interruption.] I shall answer all the right hon. Lady's questions, as I always do, but I must tell her that if she acknowledges that it was a very difficult situation and that fine judgments had to be made, she has to acknowledge it after the event as well as before and to back the judgment of the chief officer of police and his colleagues, as I do.
The police did not allow illegal acts to take place. They had to make fine judgments to prevent worse disorder and violence taking place. No permission was sought for this demonstration; indeed, so far as Trafalgar square was concerned, permission had already been granted to the TUC for a demonstration, and those peaceful protesters were kept out of Trafalgar square by what amounted to a wholly unlawful occupation of the square by the violent protesters.
It would have been a matter for the police's judgment—they would have had to seek my permission in certain circumstances—but the police might have decided to bar the whole of Parliament square, Whitehall and Trafalgar square to the protesters. If they had done so, the information available to the police was that those protesters would still have come into central London. This was a day on which the shops were open across the west end. The judgment made by the police, which I backed fully, was that the risks of uncontrolled violence right across the west end to shoppers, tourists and children, as well as to the police and to property, were much greater than what actually occurred yesterday in an event that the police were able properly and effectively to police, despite the serious damage and violence that was done.
The right hon. Lady asked whether there were meetings with the Commissioner. Of course there were. The issue of the policing of the demonstration was raised by the Commissioner and me at a series of regular bilaterals, and at a special meeting about three weeks ago. I was concerned to ensure that the Commissioner had the full resources and powers available to him. I did not wish to second-guess his judgments, but I wanted to satisfy myself that proper preparations were in place and, in particular, that—as far as it was possible to learn them—lessons had been learned from the events that took place mainly within the City of London on 18 June last year. Many of those lessons had been learned, including the need for there to be a combined control. That combined control operated at New Scotland Yard, as I saw when I visited there yesterday afternoon.
The right hon. Lady referred to the visit of the Chinese head of state. That was a demeaning comment. There is no parallel between the difficulty of policing what happened yesterday and the visit of the Chinese head of state,


nor is there a parallel in terms of methods. Yesterday, the police had to use riot gear which, happily, they did not in respect of the visit of the Chinese head of state. Moreover, the right hon. Lady knows that lessons have been learned from the Chinese demonstrations.
The statue of Winston Churchill in Parliament square is the responsibility of the Royal Parks Agency, and the Cenotaph is the responsibility of English Heritage. I understand that the police asked for both of those monuments to be boarded up, and decisions not to board them up were made by the agencies. I was not aware that those decisions were made, and the House will wish there to be more details about how they came to be made. However, the police told me this morning, in terms, that they had advised English Heritage and the Royal Parks Agency that the monuments should be boarded up.
The right hon. Lady referred to comments by the Conservative mayoral candidate. In the light of yesterday's events, this is not the occasion for swapping stories about candidates. That can be done outside the House. However, since the matter has been raised, I repeat that decisions of this kind will remain the responsibility of the chief officer of police. Whatever may have been said by candidates, the decisions of this House and the other place on the establishment of the MPA were clear. That is to say, the mayor's only power lies in proposing the budget—which has to go up, not down—for the Metropolitan police service. The MPA will replace my functions as the police authority for the Metropolitan police service, and it will operate in the same way as any other police authority.
Provision already exists in the law to ban processions, and other powers may be taken by the police. As for Greater London, the law makes it clear that a decision to initiate a request for any such ban lies with the Commissioner and the request goes, and will continue to go, direct to the Home Secretary. As with other requests for bans, if the Commissioner makes a request, I shall consider it with care.

Sir John Morris: As a former soldier, I deprecate the damage done to the Cenotaph and the Churchill statue. I recognise the fine distinction between the powers of my right hon. Friend as Home Secretary and those of the Commissioner, but I wonder whether, with hindsight, the right decisions were taken by the police. Will the matter now be further considered so that future difficulties may be avoided?
Ample statutory powers exist, but in well-organised demonstrations—I have taken part in some of them—proper liaison occurs between the organisers, the stewards and the police. It is not simply a question of damage in the west end, which my right hon. Friend mentioned, as opposed to damage in Parliament square and Trafalgar square. Demonstrations are successfully held in other places in London, such as Hyde park, with a minimum of damage, if any. With hindsight, does my right hon. Friend think that everything was done for the best yesterday?

Mr. Straw: It is my belief that the Commissioner and his colleagues had some extremely difficult judgments to make, and I back them fully on the decisions they made and continue to make in respect of the demonstrations. With respect, the sort of demonstrations that my right hon. and learned Friend mentioned are those run by people

who want a peaceful demonstration and who have made stewards available. In such circumstances, it is easy, as it was yesterday with the event organised by the TUC, to persuade organisers who have control over their demonstration to move elsewhere in the interests of public order. Yesterday's gathering was called a demonstration, but we were dealing with people who were intent on rioting in London. They were organised, but the police were the last people those involved would tell of their plans.
I defer to, and back, the judgments made by senior police officers who had to make some extraordinarily difficult decisions. All such judgments would be much easier with the benefit of hindsight, but that is a luxury never available to the police in the heat of the operational moment. The way in which they policed the events yesterday was exemplary and a huge credit to the professionalism of the British police service. I might add that yesterday's events were better policed than similar events have been elsewhere in the world.

Mr. Simon Hughes: I thank the Home Secretary for his statement, and through him I thank the police and the other public services which did a good job in difficult circumstances yesterday.
Is the Home Secretary's information and analysis that the majority of people at events in both London and Manchester were peaceful, whatever the motives of organisers may have been, and that only a minority of people were set on being disruptive and criminal? As Home Secretary and as the police authority for London, has he had any success in identifying the troublemakers since June? In the case of football, the minority of thugs are targeted by the police and dealt with. Has there been success since last year?
The Home Secretary, again in his role as police authority for London, also endorsed and supported in advance the non-confrontational strategy. Are the right hon. Gentleman and the Commissioner of Police of the Metropolis satisfied that sufficient police officers were on duty in London adequately to police all the other May day events in the city's boroughs, as well as to cover what happened in the centre of the capital?
Finally, one matter is still troubling. The damage to the Cenotaph caused great affront to many people, especially to those to whom the monument is a tribute. Was the Cenotaph policed specifically, in an attempt to protect it?

Mr. Straw: I shall deal with the hon. Gentleman's questions in turn, and I shall also respond to the question from the right hon. Member for Maidstone and The Weald (Miss Widdecombe) about the cost of yesterday's events, which I omitted to answer earlier.
The hon. Gentleman asked whether a minority of people who took part in the demonstration were involved in the violence. The numbers of people arrested show that only a minority of people were violent, but I am sorry to say that a significant proportion of those who turned up in Trafalgar square understood what was likely to happen. Given that they knew people who were going to be involved in violence, those people should not have gone to Trafalgar square to engage in unlawful activities. However, the same does not appear to have been true about those who went to Parliament square.
The hon. Gentleman will excuse me if I do not go into detail about the work of the police service in detection. I will say only that the police have arrested about 100 people already—significantly more than were arrested after the much more serious events of 18 June last year—and that they are engaged in a serious crime investigation into many of the offences committed yesterday.
The hon. Gentleman asked whether enough police were available. The answer is yes: 5,500 police officers were directly available to Gold command in New Scotland Yard for the operation, and sufficient officers were available elsewhere in greater London.
I am afraid that I cannot recall the other question that the hon. Gentleman raised.

Mr. Hughes: It was about the Cenotaph.

Mr. Straw: A great deal of effort was put into policing Whitehall. The House will know that, in certain areas, it was decided initially—and quite properly, in my judgment—not to use officers in riot gear. The hope was that protesters would act peacefully as a result, and to some extent that expectation was fulfilled. However, the events in Whitehall that I have already described meant that officers in riot gear had to be brought forward. I have already explained the police recommendation that the Cenotaph and the statue of Sir Winston Churchill should be boarded up. It is for the Royal Parks Agency and English Heritage to explain why they judged that neither monument should be so protected.
As to the cost of the operation, I understand that police overtime cost about £3 million. I shall give details of other costs as soon as they become available.

Mr. Gerald Kaufman: Is my right hon. Friend aware that the people of Manchester condemn to the utmost degree the disgraceful disfigurement of their city? In addition, they are appalled that police resources and manpower should have been distracted from the genuine law and order issues that I was discussing with my constituents only yesterday afternoon.
With regard to London, is my right hon. Friend aware that what took place is exactly the sort of direct action against capitalism that the hon. Member for Brent, East (Mr. Livingstone) has advocated and supported? Is he also aware that the Livingstone brand of approval would be given to such activities if the people of London were conned into voting for that smarmy charlatan?

Madam Speaker: Order. I must ask the right hon. Gentleman to withdraw his last remark.

Mr. Kaufman: I do so, Madam Speaker, at your instruction.

Mr. Straw: I had better not follow my right hon. Friend's latter remarks. I, of course, share his deep anger and concern at the disfigurement of his great city of Manchester by those who took part in the unlawful series of protests and the violence committed yesterday—and, I

am sure, the anger of the residents and business people of Manchester about the diversion of police resources as well.

Mr. Peter Brooke: I join in congratulating the police on their impressive conduct of yesterday's affairs in London. Pursuant to the Home Secretary's answer to the right hon. and learned Member for Aberavon (Sir J. Morris), if no plans have been submitted and no permission sought for a protest or demonstration, is an offence committed under the Public Order Acts by that very protest and demonstration taking place unplanned, unco-ordinated and with no permission sought? If there has been a forewarning of trouble, what principles govern the police in their plans, actions and decisions in response to the potential threat?

Mr. Straw: I am grateful to the right hon. Gentleman for his remarks about the impressive conduct of the police. He asks me to speculate about whether certain offences might have been committed by virtue of the fact that there was no permission for the demonstration. The position on bans and permissions is complicated. There is a power, which I have used on two separate occasions—upon application by the chief officer of police in West Mercia and in Norfolk in the past two weeks—to ban processions in certain circumstances. There is no power to ban assemblies which take place in public areas, although there are laws relating to obstruction if assemblies take place in the public highway. The right hon. Gentleman will forgive me if I do not speculate about whether particular offences may or may not have been committed yesterday.
The right hon. Gentleman also asks me what principles guided the police in their decisions as there was forewarning of trouble—of that there is no doubt. The principles that guided the police were the safety of the public, the safety of the police and the safety and security of the property of this great city—and, in particular, given the right hon. Gentleman's concerns following the events of 18 June last year, ensuring that the business life of this city could continue. The police made their judgments in the light of those principles and, as I have told the House, I think that they made the correct judgments.

Mr. Dale Campbell-Savours: As a veteran of many demonstrations in the 1960s, some of which my right hon. Friend will remember with great affection, may I say that what is happening now is characterised by a new brutality and ugliness that we never saw then? The use of balaclavas, helmets and masks shows that some people attend these rallies and demonstrations with only malice in mind. I hope that we never ban demonstrations, but the police must have the powers to deal with people who are basically criminals.

Mr. Straw: Like my hon. Friend, I went on many demonstrations in the 1960s—too many to name—and on many more recently, including those against the high levels of unemployment caused by the previous Government. Every demonstration that I went on was peaceful. We celebrated that fact, and ensured that we co-operated fully with the police, because such right of peaceful process is the essence of a democratic society.
My hon. Friend is entirely right about the new brutality, which none of us is used to, or wishes to become used to. It is wholly unacceptable—it includes using balaclavas and seeing the police as enemies. One of the many things that we were able to do in response to police requests as the Crime and Disorder Bill went through Parliament in 1998 was to give the police powers to require the removal of balaclavas and other face coverings in unlawful and violent demonstrations such as took place yesterday, and those powers have been used.

Mr. John Greenway: Like the hon. Member for Workington (Mr. Campbell-Savours), I am a veteran of the demonstrations of the 1960s—except that I was on the opposite side. In the anti-Vietnam demonstrations of both 1967 and 1968, police officers, of whom I was one, prevented desecration of property.
I agree with the Home Secretary that the current threat is completely different from those of the 1960s and others. The circumstances are difficult for the police, and I am willing to accept the right hon. Gentleman's explanation of what happened yesterday. However, the people of this country will never again accept the desecration of the Cenotaph. Following the right hon. Gentleman's confirmation that the mayor of London will not have powers to interfere, and that the Commissioner of Police of the Metropolis will have freedom of operation, does he agree that in the face of a similar threat in future, everything will be done to prevent such desecration?

Mr. Straw: The police service will be grateful for the hon. Gentleman's unequivocal support, not least because it is based on his service as a police officer. I should pick him up on one point; he said that he and my hon. Friend the Member for Workington (Mr. Campbell-Savours) were on different sides in the past, but I must say, with respect, that the point has often been made to me by police officers that in an entirely peaceful protest, the police and protesters are, in one sense, on the same side—that of democracy.
I accept what the hon. Gentleman said about the Cenotaph. Lessons must be learned from the experience of all these events. What happened was a deep and awful affront to the whole of our society and the public. We must make sure that the possibility of such desecration does not arise again.

Mr. Mike Gapes: Will my right hon. Friend confirm that anarchist behaviour of the type that we saw yesterday is nothing new? Anarchists throughout history have tried to prevent Labour movement peaceful marches such as that organised yesterday by the TUC. Does he agree that anyone—candidate for mayor of London or anyone else—who gives sustenance to anti-democratic behaviour by anarchists is not fit to hold public office?

Mr. Straw: I agree with my hon. Friend. This is the last occasion on which it is possible to equivocate. We either favour democracy and law and order, or we do not. Those who equivocate place themselves on the side of people such as the anarchists to whom my hon. Friend has referred.

Mr. Crispin Blunt: Does the Home Secretary share my concern at the reported remarks of Deputy Assistant Commissioner Mike Todd that:
Our plan was to make arrests only for the more serious offences. We had to ask ourselves whether it would be worth putting the public or our officers at risk by arresting protesters for minor crimes. We didn't want to be accused of inflaming the situation. The change in our tactics was forced on us by the demonstrators after the McDonalds incident.
If those reported remarks are correct, will the Home Secretary tell the deputy assistant commissioner that many millions of his fellow citizens—particularly ex-service men—will not regard the desecration of the Cenotaph as a minor crime? I visited the Cenotaph today, and have been told by officials of English Heritage that they wanted to board up the site, but did not do so on the advice of the police. Will the Home Secretary investigate the conflicting stories about the Cenotaph that are circulating? Is it not a sad fact that a demoralised police force felt unable to put in place a proper policing plan to protect Parliament square and the Cenotaph?

Mr. Straw: I am aware of the remarks of DAC Mike Todd. I do not have the record before me, but I do not believe that he was referring to the desecration of the Cenotaph as a minor crime. I have explained that the police take that desecration extremely seriously, as they do the despoiling of monuments in Parliament square, including the statue of Sir Winston Churchill. Those incidents are being fully investigated.
Policing is a discretionary matter. Every day we receive demands—not least from Conservative Members of Parliament and from newspapers—that the police should not fully enforce one aspect of the law in order better to enforce another; for example, with what are regarded as minor speeding infractions and so on. The matter is one of considerable discretion, as it is bound to be.
With the benefit of hindsight, it is easy to say exactly which decisions should have been taken—just as it is easy to win any battle when one knows what happened. We were dealing with an extremely fast-moving situation involving some anarchists, but also some extraordinarily well organised and determined criminal people who call themselves anarchists, who were not going to disclose their criminal plans to the police. I say again—without the equivocation that, regrettably, we hear from some Conservative Members as well as from some people outside this place—that I believe that, in Sir John Stevens and his colleagues, we have some of the finest and most professional police officers, not just in this country but in the world. We should back their judgment.
I completely refute the hon. Gentleman's comments on demoralisation. It is extremely silly for him to imply some sort of competition in the policing of such demonstrations. If he went through the record of disorder that occurred under Governments whom he supported, including serious rioting in several cities and the poll tax riots, to create a score sheet—I hope that he does not want to do so—he would find that the Conservative party was at the wrong end of it.
I am indeed aware of conflicting stories over responsibility for the Cenotaph memorial and for the statue of Sir Winston Churchill. I felt it right to give the House the information that became available to me. According to that information—although there is some conflict about the matter—the police are adamant that


they advised English Heritage and the Royal Parks agency, which are without doubt responsible for those two monuments, that it would be better for them to be boarded up.

Ms Joan Ryan: I thank my right hon. Friend for his statement; I am pleased about the measures that he has taken to deal with yesterday's deplorable events.
I am not surprised that several hon. Members have referred to the comments of the hon. Member for Brent, East (Mr. Livingstone)—it is right that those comments should be raised. If we are to condemn yesterday's events and to deal effectively with the perpetrators, the comments of Members of the House must be clear. Unfortunately, it is clear that the hon. Member for Brent. East advocates rebellion as a means of influencing Government. Does my right hon. Friend agree that it is incumbent on all Members to think carefully about, and to be responsible for, what they do and say, and that statements such as those that have been made can only encourage the behaviour that we saw yesterday? All Members of the House bar one—it seems—would condemn such behaviour.

Mr. Straw: I understand what my hon. Friend says. At the very least, such comments excuse and give licence to such behaviour, and therefore stand condemned.

Mr. William Ross: Given the contents of the Home Secretary's statement and his answers to questions today, it is plain that both he and the police were aware that yesterday's violence was carefully planned over a long period. As no one makes such detailed plans without a clear objective, why did the right hon. Gentleman describe yesterday's events as mindless violence?

Mr. Straw: I think that I am entitled to describe the violence as mindless, even though the planning was not.

Mr. Andrew Mackinlay: Will the Home Secretary clarify whether the statement that he made today to Parliament was in his capacity as the police authority for London, or what I call the residual Home Secretary, post-July 2000? Will he give an assurance that if there is a repetition of such events—which one hopes that there will not be—he will make a similar reportage to Parliament?
When the Home Secretary is reviewing this matter, will he revisit again the representations that he has received from the chief constable of the British Transport police and the representative organisations of the officers in the British Transport police, the Ministry of Defence police and the Royal Parks constabulary about the problem of jurisdiction that those people have outside the curtilage of a railway station, and outside the curtilage of the Ministry of Defence or of the Royal Parks, where they have no more competence or powers than he has—or than you or I, Madam Speaker, have? That matter has been referred to successive Home Secretaries and has been ignored. It is now time that it was addressed, because of the vulnerability of those police officers in such situations.

Mr. Straw: In answer to my hon. Friend's first question, I made my statement as Home Secretary.

I would have made, and will make, similar statements in similar circumstances, regardless of whether I continue to be police authority for London. I point out that the main events that took place on 18 June last year took place in the City of London, whose territory is not covered by my remit as police authority for London, but by a separate police authority—the police committee for the City Corporation.
Of course, if matters were as grave as they were yesterday and I had received a request for a statement from my hon. Friend the Member for Manchester, Central (Mr. Lloyd) and my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman), I would—if the House and you, Madam Speaker, had thought it appropriate—have made a statement.
My hon. Friend also asked a separate question, which I know has been concerning him, about the jurisdiction of the British Transport police and other so-called non-Home Office police forces. We are actively considering that matter, and we hope to make announcements in due course.

Dr. Michael Clark: Does the right hon. Gentleman agree that yesterday's violent chaos in our capital city was a disgrace, an affront to decent citizens, an abuse of taxpayers, who had to pay for the policing yesterday and are now paying for the clearing up, and above all, an insult to our war dead? Does he also agree that it is difficult for us to talk about mob behaviour in other countries when we have such behaviour in our own?
On television this morning, Deputy Assistant Commissioner Mike Todd said that he was proud of the way in which the police had contained the situation. Whereas I am proud of the way in which the police set about their work, I am not proud of the way in which the situation was contained, because it obviously was not. Does the right hon. Gentleman accept that unless we have some further statement about containment, that sounds like a complacent statement from the police, and that we want some reassurances for the future—as do those motorists who had their windows smashed on Waterloo bridge, the tourists whose families were frightened and the property owners whose property was violently vandalised?

Mr. Straw: Of course I agree with the earlier part of the hon. Gentleman's question, but I return to the subject of the policing decisions that were taken, which is, understandably, of concern to Members on both sides of the House. I say to the hon. Gentleman and to the House that when the police were faced with people of that kind, whatever tactics they had used, and whatever numbers and weaponry had been available to them, no policing arrangements in the world could have prevented those people from carrying out violence if they were determined to do so. There are many examples in other countries of occasions when the police have used greater force—weapons, cannon, water cannon, tear gas and much else besides—and greater damage, not less, has been caused to innocent bystanders, the police and property. That is, sadly, the reality that the police had to deal with.
Of course I very deeply regret the disorder that occurred. Obviously none of it affected me personally, but much of it affected friends and neighbours who live in or near the area where I live, in Kennington and elsewhere


in south London, so I am well aware of the disruption that was caused. I am aware of the fact that innocent members of the public were affected. Friends of ours who were shopping in the west end could not get home for one or two hours. I deeply regret the damage caused to people's motor cars and other property, including McDonald's and the memorials.
It is my judgment, and I cannot repeat it often enough, that from the Commissioner and his colleagues right down to the officers who were literally in the front line yesterday—most were wearing riot gear, but they were facing a frightening situation—we have police officers of the highest professionalism. After events such as those of yesterday, which I believe were properly and effectively policed, we should express our gratitude to those police officers for what they have done.

Mr. Martin Linton: Does not my right hon. Friend find it incomprehensible and inexcusable that a small minority of well organised anarchists—if that is not a contradiction in terms—should have resorted to violence to achieve their political objectives only three days before they will have a chance to test their opinions at the ballot box? They would have been better advised on Monday to gather support for their views among the voters of London than to engage in random acts of violence that did no credit to their cause.

Mr. Straw: I entirely accept what my hon. Friend says.

Mr. John Wilkinson: May I say how welcome is the Home Secretary's support for the Metropolitan police, particularly as many will have been drafted in from outer London and foregone their weekend and leave entitlement to serve in difficult circumstances? As for the future of policing in London, if by some mischance the Metropolitan Police Authority does not work well and does not provide sufficient support to the police service, will the Home Secretary reconsider the legislation, and if necessary return to the House to resume the powers that he currently holds?

Mr. Straw: I think that we ought to try the new arrangements first. My recollection is that the decision to establish a Metropolitan Police Authority had the approbation of hon. Members on both sides of the House. I make it clear again that the mayor will not be the police authority; the authority will be composed of 23 individuals. Twelve will be elected members of the Assembly, but they will be appointed proportionately to the party balance in the Assembly. Seven will be independents, one of whom will be appointed directly by me, six will come from a shortlist approved by the Home Office, and four will be justices of the peace appointed by a process that involves the Lord Chancellor.
Whoever is elected mayor, the police authority should be a responsible and realistic body. Of course, as with any other change in the law, if that turns out not to be the case, it will be for the House and the other place to decide on a change either backwards or forwards.

Mr. Tony Lloyd: I thank my right hon. Friend for making it clear in his statement that he was referring to the situation in Manchester as well. That sends an important message to people from outside

London that the issues are of nationwide significance and do not relate to only one city, however important that city may be.
My right hon. Friend will be aware that people in Manchester yesterday, who were going about their lawful business of shopping and taking their families out, will have been grateful for the presence of the police, who were determined to ensure that criminality did not affect them more than was inevitable because of the actions of a minority who, like those in London, were determined to disrupt the city centre.
Like my right hon. Friend the Member for Manchester, Gorton (Mr. Kaufman), I think that we should all condemn those who waste so much police time and so many police resources on such operations. As my right hon. Friend made clear, the answer to such demonstrations is adequate policing such as that in Manchester, not the knee-jerk reaction of an attempt to prevent demonstrations of any kind.

Mr. Straw: I am grateful to my hon. Friend for his remarks. I underline the fact that police outside London, as well as the service in London, had to bear some of the brunt of what happened yesterday. As well as paying tribute to the Metropolitan police service, the City of London police and the British Transport police, I pay particular tribute to the Greater Manchester police, who had to bear a serious burden yesterday and acquitted themselves very well.

Sir Sydney Chapman: I accept that the policing of demonstrations in London is kept continually under review by the Commissioner of Police of the Metropolis and by the Home Secretary, but when reviewing what happened 24 hours ago, will the right hon. Gentleman ask Sir John Stevens to consider especially the effect that the presence of extra police in central London had upon policing in other parts of London, and the possible consequences in terms of criminal offences being committed outside the area in question? I do not deny the Commissioner the right to decide how many police officers to employ, particularly in a demonstration that he was forewarned was likely to lead to violence, and I recognise what the right hon. Gentleman has said about some police being called in from outside the Greater London area, but will he consider the possibility of encouraging Sir John to have the power to appoint special constables to police normal areas when a big demonstration takes place in the centre of London, and to draw in more police from outside the Metropolitan area?

Mr. Straw: I should have said earlier to the hon. Member for Ruislip-Northwood (Mr. Wilkinson) that the overwhelming majority of the police officers available yesterday to the Commissioner were Metropolitan police officers, although there had been arrangements for mutual aid from some of the home counties. The hon. Gentleman's second point is an important one; I shall write to the Commissioner and take it up with him.

Mr. Vernon Coaker: Many of us will welcome my right hon. Friend's support for the police. Does he agree that it is important that we do not undermine their actions with hindsight? We should all bear in mind the courage that police officers showed on our streets yesterday in protecting both property and life.


It is important that we do all that we can—one of my constituents who was crying on the phone to my constituency office today would want reassurance on this matter—to catch the culprits behind the violence. We must put all our efforts into that. The wearing of masks can serve only to hide people's identities, and is not part of a normal demonstration.

Mr. Straw: As my hon. Friend says, hindsight is a wonderful commodity. However, it is never available to the police in situations such as yesterday's demonstration. As well as going to New Scotland Yard yesterday and talking to the Commissioner and all his senior colleagues during the operation, I saw the Commissioner this morning. He has assured me that he is devoting considerable resources to the criminal investigation into the offences that took place yesterday. He and all his officers understand the importance of securing the perpetrators of the offences, including the desecration of the Cenotaph and the damaging and daubing of the statue of Sir Winston Churchill.
We have already added considerably to the powers available to the police—that was one of the complaints made by some of the protesters yesterday. I make no apologies for adding to the powers of the police. If the Commissioner or the Association of Chief Police Officers puts forward proposals for additional powers, we shall consider them carefully.

Point of Order

Mr. Tam Dalyell: On a point of order, Madam Speaker. Given the increasingly dangerous situation in Montenegro, and the difficulties that our forces in Kosovo are experiencing, have there been any requests from either the Ministry of Defence or the Foreign Office for a statement on the situation in the Balkans?

Madam Speaker: I have not been told today by either of those Departments that their Secretaries of State are seeking to make a statement on that issue.

WELSH GRAND COMMITTEE

Motion made, and Question put forthwith, pursuant to Standing Order No. 107 (Welsh Grand Committee (matters relating exclusively to Wales)),
That the matter of the Welsh Economy he referred to the Welsh Grand Committee for its consideration.—[Mr. Allen.]

Question agreed to.

Renewable Energy

Ms Joan Walley: I beg to move,
That leave be given to bring in a Bill to require the Government to draw up a strategy for promoting non-convergent renewable energy technologies.
If I had my way, the House would spend the whole of today's business considering and legislating for an immediate strategy to support far-from-market technologies such as photovoltaics, offshore and onshore wind, tide technologies and biomass, such is the importance that I attach to the promotion of renewable energy.
I am mindful that this debate takes place halfway through this year's Reith lectures, which, fittingly for the first year of the 21st century, are on sustainable development. Contributions from this year's speakers—they include the European Commissioner Chris Patten, British Petroleum's John Brown and distinguished international speakers—and the follow-on studio and internet debates show the wide spectrum of people across the planet who care about and want to contribute positively to sustainable development. It is unquestionably the most pressing and fundamental challenge of our time. Parliament must be part of the on-going debate and the intention of my Bill is to focus our collective energy on what needs to be done.
I do not suggest for one moment that our Government have not acted or have failed to understand the issues. Indeed, I pay tribute to my hon. Friend the Financial Secretary who has done so much, along with his colleagues in the Treasury, to ensure that we have a green strategy. Our Government have led the international climate change negotiations and pushed through targets on carbon dioxide and greenhouse gas reductions. However, the pace of environmental devastation around the world demands that we act more quickly.
Our legislative and regulatory procedures can be cumbersome. Our need to modernise government and to bring together Departments of state with industry is understood. However, as the Environmental Audit Committee, on which I sit, has shown, it is not always a straightforward matter to put sustainability at the heart of Government policy where perhaps there are vested interests and traditional ways of doing things. Ministers and senior civil servants need a changed culture where they can show leadership, introduce cross-cutting policies and come up with workable solutions before it is too late. Nowhere is that more important than on the issue of renewables.
We are at the cusp of a policy change. In 1997, this Government inherited the position of bottom of the European renewable energy league table—Sweden topped the league with more than a quarter of its energy produced from renewables. We are now, as my hon. Friend the Member for Harrow, West (Mr. Thomas) and others have so eloquently set out, reached the point where the knowledge-based economy meets the environment, where market-based solutions deliver reductions in carbon dioxide emissions and where there are opportunities to modernise and enhance our industrial and manufacturing competitiveness by developing new technologies and expertise. My Bill seeks to exploit those opportunities.
The Government are doing much through their response to the consultation paper on new and renewable energy, through changes in the Utilities Bill, through the further consultation on the precise nature of the obligation—I would like to see such an obligation in the Bill—and in the comprehensive spending review, and I direct those points to my hon. Friend the Financial Secretary. They are also doing much through the implementation of the climate change levy in the Budget, through the £20 million of the £50 million that is likely to come to renewables, through regional development agencies being asked to oversee regional strategies—I hope that they will do that in the west midlands—through changes to the planning system, through research and through the ALTENER European research project. However, are they doing enough and are the mechanisms in place to strike the partnerships with industry, local authorities and people across the United Kingdom that now need to be made?
The Government must champion and lead us to radical and streamlined policies, and do so quickly. We need a body to do that. I do not care whether it is a sustainable energy agency, a ministerial steering group or a Cabinet Office-led liaison group, but it must draw up deadlines and cross-cutting measures that will prioritise renewables, in particular energy technologies and non-convergent renewables.
I welcome the Government's commitment to the honouring of the non-fossil fuel obligation, but in the new world of renewable energy obligations we need flexibility as well—a fresh definition of renewables so that we promote clean technologies and a system of banding to give support when it is in our long-term interests to do so. Then, we must make sure that certain technologies do not get left behind. Suppliers are likely to target technologies that will cost the least, but that is not necessarily in our long-term interests.
A framework of support is required for specific technologies, especially as the only grant-aid framework resulting from the climate change levy is likely to be insufficient to provide the kick start that is needed. We need a forum over and above the process of consultation and a response that allows the Government to engage fully with renewable energy industries.
British Bioenergy points to the huge potential for non-convergent renewable energy technologies in terms of energy and jobs. In the UK, crops on 15 per cent. of agricultural land would supply 20 per cent. of the country's electricity. With Ministry of Agriculture, Fisheries and Food, Treasury and Department of Trade and Industry support for market stimulation, there could be £4 billion of investment and 36,000 new jobs within 10 years. As capital grants of £50 million to £60 million are needed to lever investment to £4 billion, it is clear that the estimated £20 million from the climate change levy is not enough.
Let us consider offshore wind. Britain has the largest resource in Europe, technically sufficient for three times the UK's total electricity needs. Last year, only 18 MW of wind energy capacity was brought on line, in contrast to 1,600 MW in Germany, 650 MW in Spain and 300 MW in Denmark. Despite the fact that we have 33 per cent. of the cost-effective wind resource in Europe, only 4 per cent. of capacity is based in the UK.
The UK has a thriving component supply industry. Marine renewable energy sources require exactly the world-leading maritime engineering skills that the UK has


acquired for its North sea fossil fuel resources. If the UK got 10 per cent. of its electricity from offshore wind by 2010, more than 30,000 jobs would be created.
Could the comprehensive spending review, which is now under way, embrace a final transitional offshore round of the non-fossil fuel obligation, to build on the experience gained in installing the UK's first offshore turbines at Blyth harbour, and so ease the transition between the existing pool price and the new electricity trading agreements? How about a maritime renewables centre of excellence to enable UK industry to capture a share of the vast global markets that those energies represent? That would assist manufacturing across the UK.
Potential solar power householders face an uphill struggle. To encourage solar power and other embedded sources of generation such as community wind projects, the electricity generator should have powers under the Utilities Bill to compel electricity companies to introduce net metering and premium price provisions.
Already, large companies such as BP are taking an interest in investment abroad. That is not altogether surprising, given the boost for renewable sources of energy from the new legislation introduced, for example, in the Berlin Parliament on 1 April. There, the Government have taken urgent steps to ensure that the price paid for electricity generated by using renewable sources of energy is high enough to allow various types of systems to operate on an economically viable basis, thereby enabling the mass production of such equipment and bringing about lower prices.
Germany also has a 100,000 roofs programme to make extensive use of photovoltaic technology. Germany's targets go well beyond 2010 to 2050, and it is investing

now for the long term. By comparison, solar power in this country is likely to become convergent only in the long term, after 2010. However, Eastern Energy, part of TXV Europe, has, in conjunction with Greenpeace, instigated a 1,000 roofs campaign through the introduction of net metering, so convinced is the company that net metering is vital to the nurturing of a major new solar industry. Solar power is an opportunity for the UK to capture a share of the jobs and money in the expanding global photovoltaic industry, which grew by 32 per cent. last year. Debates in the Standing Committee that is considering the Utilities Bill and replies to my questions suggest that net metering is still not part of our energy policy. I should like to see embedded generation back on the agenda and Eastern Energy's demonstration project adopted nationally.
I end with what led me to begin the debate. My constituency, Stoke-on-Trent, North, was part of the north Staffordshire coalfield, where now-abandoned collieries helped to make us the powerhouse and manufacturing base of the past. I hope that my Bill will help us to become the powerhouse of the future through our emphasis on renewable energy.

Question put and agreed to.

Bill ordered to be brought in by Ms Joan Walley, Mr. Frank Cook, Mr. Gareth R. Thomas, Mr. Tony Colman, Mrs. Helen Brinton and Valerie Davey.

RENEWABLE ENERGY

Ms Joan Walley accordingly presented a Bill to require the Government to draw up a strategy for promoting non-convergent renewable energy technologies: And the same was read the First time; and ordered to be read a Second time on Friday 21 July, and to be printed [Bill 120].

Orders of the Day — Finance Bill

(Clauses 1, 12, 30, 31, 59, 102 and 113)

Considered in Committee.

[SIR ALAN HASELHURST in the Chair]

Clause 1

RATE OF DUTY ON BEER

Mr. David Heathcoat-Amory: I beg to move amendment No. 1, in page 1, line 19, at end add
'but shall cease to have effect on 1st August 2000 unless the Treasury has published an independent report setting out the effect of the present alcohol liquor duties on smuggling.'.

The Chairman of Ways and Means (Sir Alan Haselhurst): With this it will be convenient to discuss the following: Amendment No. 8, in clause 12, page 7, leave out lines 7 to 15 and insert—


'TABLE—


1. Cigarettes
An amount equal to 20 per cent. of the Retail price plus £55.95 per thousand cigarettes.


2. Cigars
£50.95 per kilogram.


3. Hand-rolling tobacco
£21.95 per kilogram.


4. Other smoking tobacco and chewing tobacco
£21.95 per kilogram.'.

Amendment No. 2, in clause 12, page 7, line 17, at end add
'but shall cease to have effect on 1st August 2000 unless the Treasury has published an independent report setting out the effect of the present tobacco products duty on smuggling.'.
Clause 12 stand part.

Mr. Heathcoat-Amory: The amendments deal with excise duties, on which the Government have an unsustainable and self-defeating policy. It creates rather than solves social problems, encourages criminality and sometimes leads to a fall in revenue.
Alcohol and road fuel duties increased by a further 3.4 per cent. in the Budget. That is something of a fiddle. The Chancellor said in the Budget speech that those duties would increase only in line with inflation; the figure of 3.4 per cent. appears nowhere in the Budget document.
Furthermore, the Government have changed the rules for calculating inflation. Contrary to what the Paymaster General told my hon. Friend the Member for Arundel and South Downs (Mr. Flight) on Second Reading, the rule was not inherited from the previous Government. They introduced the rule not to take the actual rate of inflation—or the historic rate—up to the date of the Budget but to predict an inflation rate. The arithmetic that is currently before the Committee is massively to the advantage of the Treasury.
It is interesting that the Government have applied the figure of 3.4 per cent. only to uprating excise duties. When it suits the Treasury, the Government have used a lower inflation rate. All personal allowances have therefore been

uprated not by 3.4 per cent. but by 1.1 per cent. The idea of applying an overall indexation figure across the board has given way to an elastic concept of taking the inflation rate that suits the Treasury. That has netted the Government an extra £750 million. That is the difference between the actual inflation rate and that which the Government use when it suits them to uprate the indirect taxes that we are considering.
There is also a more serious issue. To put it bluntly, the Government are up a gum tree on their excise duty strategy. The gap between United Kingdom and continental duty rates on road fuels, alcohol and tobacco products is wide and increasing in every Budget. In a single market, that is unsustainable. It leads to smuggling and a loss of revenue.

Dr. Nick Palmer: I agree with the right hon. Gentleman that the widening gap is not sustainable in a single market. Does he agree that greater efforts should be made to promote tax harmonisation in the European Union?

Mr. Heathcoat-Amory: Tax harmonisation through the European Commission is not necessary; all the Government need do is listen to what the market is telling them. Unlike the Labour party, we are in favour not of a bureaucratically imposed harmonisation policy, but of a market-driven single market. I think that the hon. Gentleman agrees that the market is clearly telling the Government that the present duty differential is unsustainable. However, he is right in that there is something truly bizarre about a Government who pursue tax harmonisation in Europe except for excise duties, which they are disharmonising. They are making the wide duty differential between ourselves and the continent worse. He would agree that that is the prime cause of the smuggling, criminality and loss of revenue.

Dr. Palmer: rose—

Mr. Nigel Beard: rose—

Mr. Heathcoat-Amory: I give way to the hon. Member for Bexleyheath and Crayford (Mr. Beard).

Mr. Beard: If the Government were to take note of what the right hon. Gentleman says and reduce duties to the level of those on the continent so that no such gap existed, how should they make good the loss of revenue?

Mr. Heathcoat-Amory: That cannot be done all at once, but we faced up to the issue. We are not telling the Government to act on a problem that we did not recognise and do something about. When we faced a similar situation with the smuggling of beer and other alcohol products, we froze alcohol duties in our last two Budgets. We cut them in real terms precisely to start the long march downwards to a more sustainable indirect tax policy.
We cut the duty on spirits, especially whisky, in our last two Budgets, despite the fact that we had to contend with a Budget deficit, and we responded in the only way in which a Government should: we considered the causes


of the problem rather than simply dealing with the symptoms. Regrettably, this Government ignored all the warnings and made a serious problem much worse.

Mr. John Bercow: Does my right hon. Friend agree that Ministers are ignoring not only the warnings that he and others gave before the election, but their own statements? Does he recall that on 23 January 1995, the hon. Member for Bristol, South (Dawn Primarolo), now the Paymaster General, opposed swingeing increases in tobacco duty precisely on the ground that such increases would play into the hands of the smugglers? Clearly, she has committed a tergivisation. Should not we be told why that is so?

Mr. Heathcoat-Amory: I wish the Paymaster General were here to answer that question. I strongly suspect that the Government have no answer. They recognised the problem in opposition; in government they have not only failed to deal with it, but have made it worse.
Tobacco presents perhaps the most serious problem, but they have increased the price of legal cigarettes by 25 per cent. I refer to legal cigarettes because they cannot increase the price of illegal tobacco. They have piled the increases on to legally sold cigarettes and tobacco products so people have increasingly switched to illegal tobacco products. The average price of cigarettes bought in this country has probably fallen during that time. That has benefited not Treasury revenue and the legitimate trade, but the smugglers and criminal gangs. The result is more smuggling and more smoking. We face not only a failed law and order policy, but a failed health policy.

The Financial Secretary to the Treasury (Mr. Stephen Timms): The shadow Secretary of State for Health, the hon. Member for Woodspring (Dr. Fox), has rightly said that tobacco duty increases send out the correct health message. Given the different view that the right hon. Gentleman has expressed, can he tell the Committee what discussions he has had with his hon. Friend?

Mr. Heathcoat-Amory: I have just answered that point. I said that the Government had increased the duty, but that the average price of cigarettes had probably fallen because people were switching to illegally sold tobacco products. If it were somehow magically true that the Treasury could increase the price of all tobacco products, that might have a beneficial health effect, but it is not what is happening. An increasing number of people are obtaining cigarettes and hand-rolling tobacco from illegal, cheap sources. It is now estimated that 5 million smokers in this country routinely supply their everyday needs from the illegitimate market, in which the price has fallen rather than risen.
Not only is that a failed health policy, because more people are taking up smoking, it is a policy which cheats the Revenue. The Government's own figures show that the revenue losses on tobacco alone as a result of smuggling amount to £2.5 billion a year. Moreover, the policy is massively regressive. In so far as people do buy illegal cigarettes, they tend to be members of lower-income groups. I do not think that Labour Members have given up caring about the regressive nature of their Budgets, but they ought to listen to their constituents.

In my area, certainly, I find that it is those who can least afford to buy cigarettes who appear to be smoking. I exempt my hon. Friend the Member for Arundel and South Downs, who is the only member of the shadow Treasury team who smokes. He is something of an exception: I think it is common knowledge that, in general, the poorer income groups smoke the most.
We have a policy that hits the legitimate market and boosts the illegal market—and this from a Government who came to office boasting that they would be tough not only on crime, but on the causes of crime. In this instance, the cause of crime is a completely unsustainable tax and duty policy.

Mr. Christopher Leslie: Instead of trying to justify and make excuses for smuggling and criminality, why does the right hon. Gentleman not commit himself to, say, spending more on Customs and Excise?

Mr. Heathcoat-Amory: Because that will not work. I shall say more in a moment about the Government's failed policies. They are launching an initiative this year—it is not the first; they have launched others in the past—to do precisely what the hon. Gentleman suggests, and recruit more Customs and Excise officers and civil servants. Meanwhile, the situation continues to get worse because the Government are not dealing with the cause of the crime. Instead, they have come up with a new wheeze: they are trying to sound responsible and respectable by saying that the extra revenue from the tobacco tax will be spent on the national health service.
Here again, the Government are in something of a muddle over exactly what sums they are talking about. The Chancellor of the Exchequer said that the increased revenue would amount to £300 million in the coming year. Not to be outdone, the Prime Minister said a few weeks later that it would amount to £400 million. Two weeks after that, the Chief Secretary to the Treasury said that it would amount to only £235 million. It is not surprising that the Government do not know how much extra revenue the policy will give them. Last year, the revenue from tobacco duty actually fell by £2.5 billion. It was lucky that the NHS was not dependent on that revenue.
A report published by the Government at the time of the Budget refers to the huge number of people now engaged in illegal trade. Page 6 of that report states that
the numbers of people involved in the buying and selling of smuggled goods has risen to many thousands, possibly millions.
The report also says that smuggling is on a strong upward trend.

Mr. Desmond Swayne: Over the weekend, I enjoyed the company of a house guest. On Sunday lunchtime, he went to the pub in a very prosperous part of Hampshire. Having expressed an interest in buying some cigarettes over the counter, he was approached by two potential salesmen offering to sell him 200. That was in rural Hampshire.

Mr. Heathcoat-Amory: My hon. Friend is right. The problem is no longer confined to the channel ports and to the south coast, it is nationwide.
An alarming development—to which perhaps my hon. Friend alludes—is that people are beginning to think that they are not doing anything wrong in buying smuggled


goods. Indeed, they are not committing a crime—there is nothing illegal about buying smuggled cigarettes; the illegality is only in selling them. Respectable and responsible people are increasingly saying that if the Government are so stupid as to defy common sense in that way, making a bad situation worse, is it really a crime? That is a worrying development.
In addition, the Government's whole policy undermines the legitimate trade. Small shopkeepers are constantly being harassed by the police for selling cigarettes to under-age smokers. They are fined for selling cigarettes to people under the age of 16, but meanwhile the Government are implementing a policy that encourages under-age smoking because of the vast and growing illicit market operating throughout the country through uncontrolled outlets. Is it any wonder that smoking among young people is increasing again? The only response that the Government have to that very serious problem—the epidemic of smuggling—is to launch yet another campaign.

Mr. Barry Gardiner: Will the right hon. Gentleman confirm that the Government are looking at the practice of forestalling in the industry, which has been responsible for a large amount of the drop in revenue? That practice by the manufacturers, whereby they clear a large amount of their product through pre-Budget prices and then only a very small amount of their product after the Budget, is one of reasons why there has been a loss to the Revenue and why an even greater loss is predicated for next year. It has little to do with smuggling. The Government are seeking to tackle that industry problem.

Mr. Heathcoat-Amory: Again, the Government are tackling the wrong end of the problem. They are dealing not with the cause of the problem, but with its symptoms. Simply fiddling around with the forestalling problem will do nothing to stop the underlying illegality and smuggling. If the hon. Gentleman really thinks that some changes in the way in which tobacco manufacturers pay their tax will deal with the issue that I have described, he fails to understand not only the issue, but the Government's literature. Their own report described in graphic terms the scale of the problem facing the country because of smuggling.
I was about to describe a previous Government initiative. They have just launched a new proposal to recruit and deploy almost 1,000 extra civil servants, but they have done all that before. On page 73 of the pre-Budget report of November 1998, they set out a great new initiative called the alcohol and tobacco fraud review, including extra resources, recruitment of new staff, tougher policies on the prosecution of offenders and on seized vehicles, the introduction of sentencing guidelines and the revocation of licences from businesses caught smuggling. What happened? The situation went on getting worse.
I shall give perhaps the most eloquent example of that. Based on that previous initiative, the Government supposed that their revenue for 1999–2000 from tobacco products would be £8.9 billion. In fact, it was £5.7 billion. That is a staggering undershoot. They lost more than £3 billion because of the failure of their initiative to halt smuggling, so that is the answer to the hon. Member for Shipley (Mr. Leslie).
One can have all the anti-smuggling initiatives in the world, but they will not work until one tackles the root cause of smuggling. Exactly that point applies to the initiative that the Government are launching on the back of their just-published report. The seeds of the Government's failure is written into that report, in which their own figures show that smuggling will worsen in the next three years. Even Ministers say that the initiative will not solve the problem and that, indeed, the problem will worsen. If Ministers say that it will get worse, I think that we are entitled to believe them on that point.
5 pm
The Government are dealing with the symptoms of smuggling, not with its causes. Today, we should like to hear from Ministers a real report on the real causes of smuggling. They asked Mr. Martin Taylor, who is a distinguished business man, to do a report on that very issue. He reported to the Government, but that report is secret. We have previously heard from Ministers much waffle and windy rhetoric about openness, the public's right to know and accountability, and that everything would be published and in the open—but, although they have commissioned a report from an outside business man into the very issue of the causes and consequences of smuggling and what to do about it, that report is secret.

Mr. Michael Fallon: My right hon. Friend has described the report as secret, but is he aware that Ministers, in their reply to the Treasury Committee's report, described the Taylor report as "personal"? How can a report commissioned by the Chancellor of the Exchequer be described as his personal property?

Mr. Heathcoat-Amory: My hon. Friend is absolutely right—taxpayers paid for that report, and it is not personal at all. The report was not going to be personal until Ministers read it and realised that it was rather embarrassing. Suddenly, the report has become very personal and secret.
It is widely known in the trade that Mr. Martin Taylor, being a man of common sense, included in a letter attached to the report the commonsense observation that if we really wants to do something about smuggling, we have to do something about the duty differential between the United Kingdom and the continent. As publication of that observation would be too embarrassing for the Government, they have suppressed it.
There is a similar situation in the alcohol products market. I shall not repeat the points that I have already made, but they apply in very much the same way in that market—in which, for example, the licensed trade is being undermined by the Government. It took several hundred years to build up a responsible, licensed trade in the United Kingdom, so that people could drink in responsible surroundings in which alcoholic drinks should not be sold to minors. It is quite a considerable achievement. The Government, however, are putting at risk and undermining entirely that achievement by presiding over a disorderly market in which drink is sold in uncontrolled outlets to minors and others.
The cause of that situation is staring the Government in the face: it is, again, a large and growing duty differential. The difference in beer duty between the United Kingdom and France, for example, is about 30p.


Other European countries have faced exactly the same problem. Historically, all of the Nordic countries and Ireland have, like the United Kingdom, had high alcohol duties. However, when those countries joined the single market and faced the demands that it imposed, all of them cut their duties on alcoholic products. Only the United Kingdom Government are defying logic and common sense by increasing duties in every Budget, making a serious problem worse.

Mr. Dale Campbell-Savours: If Conservative Members believe that those duties should be cut, how would they compensate for the lost revenue?

Mr. Heathcoat-Amory: If the hon. Gentleman had been listening, he would know that no compensation is necessary as the policy is costing the Government money. Last year, the duties received on tobacco products decreased. If he really wants to understand the issue, he should read the Government's own documents on the matter. The situation is crazy, undermining not only health and crime policies, but revenue policy.
Of course, there are winners from the policy. They include the criminal gangs—which may well be operating in the hon. Gentleman's constituency—and the smugglers. There is a Treasury that benefits from the policy, but it is the French Treasury. There is a retail industry that benefits as well, but it is based in Calais. The losers are the legitimate outlets, including the retailers and traders and, when it comes to alcohol, the brewers and their suppliers—as well, of course, as the British taxpayer. We want to put an end to that.
We are faced with the policy of a madhouse. We want an unvarnished independent review that sets out the link between the level of duty and the level of smuggling. If the Government believe that the high level of duty is not the cause of the criminality, let them show it by commissioning an independent report and being brave enough to publish the results.

Mr. Bercow: Given that on average more than 80 per cent. of the cost of a packet of cigarettes finds its way to Treasury coffers, does my right hon. Friend agree that if Ministers regard that as a harmless phenomenon, they owe it to the House to tell us for what proportion of the total cost of a packet of cigarettes excise duties should ultimately account?

Mr. Heathcoat-Amory: My hon. Friend is right. That could well be included in the report for which we are calling. We want a comprehensive look at the entire structure of alcohol and tobacco duties and the link between prices and smuggling. There are many examples from around the world on which to draw. Canada faced a similar problem and successfully stopped the smuggling by cutting its duties. The Nordic countries have done the same. There are plenty of examples and information available, but the Government are too scared to put the issue to the test of an independent review that they would then publish. Unless and until the Government come forward with the information that we want, we shall vote against the duty increases.

Dr. Palmer: I was interested by the comments of the right hon. Member for Wells (Mr. Heathcoat-Amory). I have not yet fully understood whether the Conservatives are opposed to the duty levels because they feel that they are conducive to smuggling—that was the only argument that he advanced—or whether they wish for lower duties per se. If the Government's new initiatives with the tobacco industry on clearer labelling for duty-paid cigarettes succeed in reducing smuggling, will the Conservatives accept the health argument for high levels of taxation, or will they adopt the populist argument—a tactic that they seem to be flirting with in other policy areas—that cigarettes ought to be cheap?
That goes to the heart of the amendment. If it stands or falls on the issue of smuggling alone, the Opposition are saying that they have no objection in principle to high rates of duty. It would be helpful if that could be clarified.

Sir Michael Spicer: Another pertinent question might be whether the hon. Gentleman accepts and approves of the regressive nature of the taxes.

Dr. Palmer: I am grateful for that intervention. Rather than looking at single taxes, where arguments could weigh one way or the other, we should consider the overall impact of direct and indirect taxation. One of the most welcome features of the current Government has been the substantial redistributive impact of taxation as a whole. I would be surprised to hear the hon. Gentleman welcome that, but if he wishes to join those favouring redistribution, he will be welcome on this side of the House.
I was curious about the suggestion by the right hon. Member for Wells that taxation is set by a free market. That is an interesting concept, because there is no market in the usual sense of buying and selling. However, there is a good deal of international debate about the tendency of international free trade to encourage a movement of taxation to the lowest possible level that any country may choose to impose, just as there is a tendency to encourage movement to the lowest possible standards.
When I lived in Switzerland, I saw embarrassing advertisements by the British Council, encouraging companies to move to Britain on the grounds that wages, taxes and Government interference were lower. I remember asking Swiss employers whether that was significant for them. They said that it was nice to pay less money, but that the primary factor for them was the relatively low level of education and infrastructure in Britain.
The right hon. Member for Wells is attempting simultaneously to satisfy the more populist elements of his constituency, which favour low levels of indirect taxation, while attempting to remain on this side of respectability by disguising it as an attack on smuggling. He said that small shopkeepers are constantly harassed to prevent under-age smoking. Is he saying that he would prefer that small shopkeepers were not approached—I will not use the word harassed—to discourage under-age smoking? Is he saying that under-age smoking should be left to the free market? Is he saying that because there is a difficulty in discouraging under-age smoking when those concerned buy from smugglers, we should give up on attempting to persuade shopkeepers not to supply under-age smokers?

Mr. Heathcoat-Amory: Before the hon. Gentleman wastes any more of the House's time by distorting


my argument, may I remind him that I was making the point that it is no good simply harassing small shopkeepers to prevent under-age smoking when it is the Government who ought to be addressing the problem? The Government should stop running a policy that encourages the distribution of tobacco products in uncontrolled outlets, which has increased and is increasing the incidence of under-age smoking. The Government should start by taking action themselves, rather than putting the problem on to small shopkeepers.

Dr. Palmer: I am still struck by the repeated use of the word "harassment". The right hon. Gentleman is using his criticism of the rate of duty to side with the less responsible small shopkeepers who object to the police keeping an eye on them to discourage their sale of cigarettes to under-age purchasers. Is he willing to state clearly that the Opposition are strongly in favour of small shopkeepers being discouraged from selling to under-age children?

Mr. Heathcoat-Amory: Of course we are, but the Government must play their part. It is no good simply expecting the legitimate trade to bear the full burden of preventing under-age smoking when the Government are pulling in the opposite direction—and hypocritically urging action against small shopkeepers—when the Government themselves are responsible for a policy that is increasing the incidence of under-age smoking, as is shown by the regrettable statistic that the number of people in the younger age brackets who are taking up smoking is increasing.

Dr. Palmer: We may understand then that Conservative policy is to support what the right hon. Gentleman earlier called the harassment of small shopkeepers to prevent them from selling to under-age smokers, as long as the Government also take the action that he wishes to see.

Mr. Gardiner: Does my hon. Friend agree that the right hon. Member for Wells (Mr. Heathcoat-Amory) has just undermined his own argument? He stated that the increased duties have caused an increase in illegal sales, which means that children are increasingly buying tobacco and cigarettes, but he also argues that that is cause for harassing legitimate outfits. If under-age consumers of tobacco are buying it on the black market, it makes no sense for him to urge the harassment of shopkeepers with legitimate businesses.

Dr. Palmer: I am grateful to my hon. Friend for his well-expressed point, which shows the basic weakness of the Opposition's position. I do not wish to take up the House's time too much—

Mr. Eric Forth: Go on.

Dr. Palmer: I knew that that would please the right hon. Gentleman.
As a Nottingham Member, I share the concerns of other hon. Members who represent cigarette producing areas about smuggling. We need to do more to eliminate the similarity of smuggled goods to legitimately produced

goods, and I welcome the joint Government-industry initiative on that, which the right hon. Member for Wells failed to mention. Tax harmonisation with the European Union on tobacco also makes sense, and the industry has repeatedly said that it would welcome that.
The amendment is totally one-sided. It is selective and looks only at one aspect of the problem. As such, it is not a serious alternative to clause 1.

Mr. Forth: This debate is rapidly becoming a combination of political correctness, economic illiteracy, wishful thinking and nanny-statism, all wrapped up into one bizarre package. We have what would appear to most people to be an obvious argument that, for reasons that I hope the Minister will explain when he replies to the debate, the Government are unable or unwilling to grasp. It is obvious to the Opposition, and to almost everybody outside the House. Smokers and non-smokers, people who buy legitimate or smuggled cigarettes, and small and large shopkeepers all know what is going on, and they cannot see the point of the exercise. However, the Government persist with their sterile and damaging policy. The Minister must give us a thorough explanation of what the Government think that they are doing, whether they accept what is happening, and where the Government think that their policy is leading.
There is a peculiar analogy to be made for this debate, because it is all bound up in the politically correct policies that we have become more and more accustomed to from the Government. For example, an environmental argument is introduced when they seek to justify their swingeing increases in vehicle petrol duties. At the same time, they have reduced taxation on domestic fuel, which produces even more pollution than vehicle emissions. The Government have failed to justify that. In this case, taxation is allegedly used as part of health policy, but it is patently failing. Not only is it not yielding the revenues, but—as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) pointed out—the incidence of smoking is increasing. On every possible count, the policy is failing.
We need a full explanation from the Government of whether they will accept amendment No. 8 and if not, why not.

Mr. Beard: Is not there a paradox in the right hon. Gentleman's argument? He complains that the incidence of smoking is increasing, and especially among young people, yet Conservative policy is that the markets would somehow harmonise prices on the continent and in Britain. Is not that essentially the same as saying that we ought to harmonise taxes? However, if taxes were harmonised, the price of cigarettes would fall further. As a result, even more people would smoke, and even more children would acquire the habit. Does not that run totally contrary to any sensible health or revenue policy?
Likewise, the right hon. Gentleman—

The Chairman: Order. This is developing into a mini-speech. The hon. Gentleman should ration his remarks.

Mr. Forth: I am delighted to have the opportunity to answer at length the points raised by the hon. Member for Bexleyheath and Crayford (Mr. Beard). I shall seek to do so while—I hope—staying strictly in order.
I am sure that the hon. Gentleman was here a moment ago when my right hon. Friend the Member for Wells took great pains to explain the matter. I am not in favour of tax harmonisation, in the European Union or anywhere else. However, I have just returned from the United States of America, where there is a single market and a single currency. There is no single currency in the North American Free Trade Agreement: Canada and Mexico proudly retain their own currencies while taking part in a very satisfactory free trade arrangement.
As my right hon. Friend explained so eloquently a short time ago, there is in the United States a tendency for tax levels not to diverge so excessively as to give rise to a lot of cross-border smuggling between states. That is a perfectly natural, market-driven process, and it is worlds apart from the heavy-handed, bureaucratic, ideological process favoured by Labour Members. They want someone in Frankfurt or Brussels to impose tax rates and regimes on this country. We oppose that completely but, as my right hon. Friend said, we have no objection to the evolution of proper tax regimes in different parts of a single market, as long as that single market continues to function.
Worse, the hon. Member for Bexleyheath and Crayford has not grasped that we used to have a proper market in these products. They were sold through properly regulated and supervised outlets, and there was a perfectly reasonable regime governing sales to under-age people, and so on. However, now that a growing proportion of the market is attributed to smuggled goods, we have no chance of regulating or supervising the market in any way.
We want to find a way to restore an orderly market in these products. It is right that that market should be regulated with regard to under-age consumers, but I believe that the decision about using the product should be left to the mature judgment of people of a proper age, based on proper information from the Government.

Mr. Campbell-Savours: The right hon. Gentleman is almost a convert. He expresses support for the principle that there is a tendency to equalise taxation, as happens in the free trade area in the United States of America, but does he see Europe in the same way? Does he believe that there should be a tendency to equalise all forms of taxation in the European Union? How would he justify that?

Mr. Forth: Again, the hon. Gentleman must have fallen asleep temporarily when I drew my preferred analogy. I shall not use the analogy that he used, as I prefer my own, which concerns NAFTA. That arrangement is perfectly satisfactory to the Canadians, Americans and Mexicans, but has no single currency or overarching bureaucracy. However, I am watching you, Sir Alan, as I do not want to stray out of order.

Sir Michael Spicer: Will my right hon. Friend give way?

Mr. Forth: I will, but I hope that my hon. Friend will not tempt me much further down this line of argument. If he does, I shall blame him for what you might say, Sir Alan.

Sir Michael Spicer: I am most grateful to my right hon. Friend, who does not need my help to cope with

mischievous questions from Labour Members. However, does he agree that, with cigarettes in particular, the differential between taxes in European Union countries and taxes in countries outside the EU is more important than tax differentials inside the EU?

Mr. Forth: My hon. Friend makes a very proper point. It is at the root of what we are disputing.
My right hon. Friend the Member for Wells eloquently set out these obvious and basic factors, and we await the Minister's reply. I have no doubt that he will want to set out in detail the Government's response to those points and explain whether they will accept amendment No. 8, which would be a significant contribution to solving the problem.

Mr. Roger Casale: At the start of his remarks, the right hon. Gentleman referred to economic literacy. The economics of his proposed changes to discourage smuggling—a freeze, as I understand it, on the level of tobacco duty—mean that the overall tax revenue from tobacco duty would either go up or down. It might go up because there would be less smuggling and more people would buy cigarettes legally. Equally, if the rate of revenue received goes down, the amount of overall revenue would probably go down. If tax revenue were to increase, would he commit to spending that extra money on the national health service, as the Government are doing? If it goes down, how would he replace that money, or would it be taken out of the NHS, resulting in cuts to the service? Where would the money be spent if the revenue were to increase as a result of his proposals, and where would it come from to compensate for any reduction?

The Chairman: Order. The hon. Gentleman is getting near to a peroration.

Mr. Forth: These are helpful interventions. I will reply briefly to the hon. Gentleman's question. I do not believe in hypothecation, which is a self-defeating exercise. I can see why the Government have done it—for their usual populist, trivial, short-term reasons. As I do not agree with hypothecation, I do not need to answer the hon. Gentleman's question in the way in which it was put.
My judgment is that were my amendment to be accepted, the reduction in tobacco product prices would regularise and restore the market to where it was some time ago. Revenues overall would probably go up, and products would be sold in a more orderly market rather than one which is becoming increasingly illegal and based on smuggling. That would have a number of consequences. At present, we cannot, as effectively as we would wish, seek to prevent under-age children from smoking. That purpose is shared across the House. I believe that we have a duty, as effectively as possible, to seek to prevent our young people from taking up smoking, but once they reach the age of, say, 18, our duty is properly to inform them of the dangers of consuming that product and then leave it to their judgment.

Mr. Casale: I am grateful to the right hon. Gentleman for giving way a second time. Is he saying that he would like more money to be raised for the Exchequer through the sale of tobacco?

Mr. Forth: I would be very happy if that were the case. That is the way it used to be, and I believe that my


amendment would lead us in that direction. That is why I hope that the Minister will consider it sympathetically and perhaps give a positive response.

Mr. Bercow: If tax rises continue to depress revenues and to advance other countries' tobacco industries at the expense of our own, should we not be told by Ministers whether, on the strength of the evidence, they would be prepared to change policy, or whether they intend to continue with the existing foolhardy policy for fear otherwise of having the finger pointed at them by the politically correct fetishists?

Mr. Forth: I am certain that that is uppermost in Ministers' minds, because these days it usually is. We know that the Government are driven almost solely by focus groups, opinion polls and probably by fetishists as well, as my hon. Friend suggests. The Government are not driven, regrettably, by economic literacy, cool analysis or a genuine desire to introduce policies that make sense. However, the Minister will have a chance to redeem himself and the Government when he seeks to catch your eye, Sir Alan, and we look forward to that very much.
I want to introduce some figures into the debate to illustrate the extent of the problem. I have been told, and have every reason to believe the figures reliable, that a typical pack of 20 king size cigarettes costs £4.17 in the UK at full retail and with full tax paid. On the continent, the price varies from as low as £1.25 in Greece to £1.84 in Belgium. That huge differential explains the enormous and increasing propensity for smuggling.
My hon. Friend the Member for New Forest, West (Mr. Swayne) described the kind of offer that most of us will have experienced. Smuggled tobacco and alcohol products are regularly and illegally, but temptingly, offered to people in every part of the United Kingdom. That explains the figures given earlier by my right hon. Friend the Member for Wells about the fall in revenue and the increasing proportion of the total market represented by smuggled product. Price differentials drive that process.
I have heard anecdotally of prices as low as £1 a pack for 20 cigarettes. The tobacco industry suggests that the going rate on the black market is about £2.50. Even that price tempts the consumer and makes smuggling profitable. The Government are losing an increasing amount of revenue as a result, as well as losing any possibility of exercising regulatory control, particularly over the sale of products to under-age children.

Mr. John Swinney: Does the right hon. Gentleman recall from his experience in the previous Government whether debates about the growing disparity between duty in this country and that in some of our European neighbours ever influenced the decisions then taken to increase fuel duty sharply ahead of inflation? I seem to recall that the Conservatives did that during their period in office.

Mr. Forth: Many things happened during the glorious period of Conservative Government which I regretted at the time, or, frankly, regret with hindsight. As it happens, that policy was one of them. I never accepted the alleged environmental arguments or the effect that the policy was

supposed to have on the product. I am not aware that swingeing increases in tax on petrol for vehicles has led to any diminution in the mileage travelled by individuals or the propensity to buy vehicles that consume a lot of petrol. The policy has been a successful revenue raiser, but it has done damn all for the environment.

Mr. Bercow: I can confirm the veracity of what my right hon. Friend has said about his attitude to excise duties. As long ago as 1989, at a conference in Nottingham, in an admirable speech made while he was a member of the Government, but in front of a private audience, he expressed his opposition to higher excise duties on tobacco and alcohol. I remember it well.

Mr. Forth: I am grateful to my hon. Friend, whose memory in these matters is legendary. I defer to him totally in what he says.
The Government's policy is disastrous from almost every conceivable point of view. Revenue is going down, smuggling is going up and our ability to regulate the product properly for youngsters is reducing.

Liz Blackman: Is the right hon. Gentleman aware that countries such as Spain and Italy have their own smuggling problems despite having considerably less excise duty on their tobacco products than we do? Is not the logic of his point that combating the problem would mean the complete removal of excise duty? Is that what he really proposes?

Mr. Forth: The countries mentioned by the hon. Lady must deal with their own markets and domestic policies in their own ways. That is a vital principle. However, as my right hon. Friend the Member for Wells said, they must, in doing so, have reasonable, sensible and proper regard to the effects of the single European market that allegedly exists. They would have to consider possible cross-border movements of products before they made up their minds. In fact, their problem is the reverse of ours. If, as the hon. Lady says, countries such as Spain believe that they have a health problem related to the consumption of tobacco, that is a matter for them.

Liz Blackman: I was trying to make the point that their problem with smuggled tobacco goes well beyond the EU. That tobacco is also coming into this country. Logically, combating the price differential would require removing excise duty altogether. Is the right hon. Gentleman seriously proposing that?

Mr. Forth: If the hon. Lady is saying that our European partners have lousy border controls and no grip on what goes into their countries from outside the EU, I should not dispute that for a moment. That is one of the factors that we should take into account when considering our relationship with the EU as a whole—whether on asylum and immigration or on the import of products from outside the EU. She and I probably do not disagree much on that. If she says that there is a huge problem, she is probably right. Let us discuss that, but not in the context of the amendment.
I should be interested in holding a debate with the hon. Lady on the EU market in general, on whether the single market functions effectively and, particularly, on whether that EU market is properly protected from products from


outside that are harmful either to the health of our peoples or to our fiscal policies. Those are legitimate concerns, but not in relation to the arguments that I want to make today. I do not fear to make arguments on those interesting matters—countries would do well to consider them carefully.
I do not want to prolong the debate because the points almost make themselves. However, despite that fact and even though my right hon. Friend the Member for Wells has made them in his way—as I have in mine—there is no evidence that Labour Members are prepared to accept them at all, so perhaps my hon. Friends will have to ram them home much more effectively than I could possibly do.
I have a few questions for the Minister. I hope that he will answer them in his usual courteous, comprehensive and knowledgeable way. What is the Government's current estimate of the trend in smoking in this country, especially among young people? I should like that to be on record, so that we know what the Government believe the underlying trend to be.
What is the Government's estimate of the smuggling of tobacco products by volume and by value? It is important for us to hear officially from the Minister the Government's current estimates. What is their estimate of the loss of revenue that they are suffering as a result of that smuggling?
Those key questions face the Government and, indeed, all of us. Whether the money is hypothecated to health is an important factor, but it is not crucial. The crucial factor relates to the encouragement of illegal activities—widespread smuggling and purchase of smuggled goods. Many Labour Members have raised—legitimately—the loss of any control or regulation in the sale of those smuggled products, especially to under-age people. That is one of the key questions for the Government.
When the Minister replies, I hope that he will tell the House that he accepts my amendment; if not, he will have to give some jolly good reasons why not.

Mr. Campbell-Savours: I shall intervene only briefly; the right hon. Member for Bromley and Chislehurst (Mr. Forth) has provoked me into saying a few words.
The right hon. Gentleman has not answered the point made by my hon. Friend the Member for Erewash (Liz Blackman). He should think clearly about the implications of what she was saying. If there are different tax regimes within Europe, under which a packet of cigarettes might cost 8 francs in France and 3,300 lire in Italy—a differential of about 20 per cent.—and if, moving from France to Italy, there is still a market, even with such a tight differential, does that not show that the amendment would not deal with the problem? We are doing so through this year's Budget. The right hon. Gentleman is not addressing the problem.
If a differential of only 20 per cent. is enough to incite people to trade in cigarettes, because a profit can be made simply by walking through a frontier within the EU at night, or by driving across it in a van, the right hon. Gentleman's proposals will not work.
I lived in Milan as a boy. When we were in the countryside, we used to go up to Como in the evenings, and if one stood on a bridge late at night, where the rivers

came down from the alpine villages, one could see men carrying sacks on their back—sacks of fags, coming in from Switzerland to Italy. The differential was very little, but it was sufficient. I remember vividly that, when I was a child, the differential was sufficient to ensure that street corners throughout the city of Milan, every day of every week of every year, were crowded with people selling cut-price cigarettes that had come in from other parts of what was then Europe, not the European Union. It is going on today. In Rome, one can find cigarettes that have come in from Greece. The differential is probably only 20 or 30 per cent.

Mr. Oliver Letwin: Is the hon. Gentleman advancing the rather interesting argument that the size of the differential has no impact on the size of the smuggling market?

Mr. Campbell-Savours: Yes; I think that there is an argument that, as long as there is the potential to make a profit, people will trade. In the event that that is the motive—simply that there is sufficient differential to make a profit—the only way to deal with it is to take far greater measures to affect the trade.

Mr. Letwin: What reason does the hon. Gentleman advance for supposing that this is the unique case that disobeys the laws of economics and supply and demand in every other domain?

Mr. Campbell-Savours: My own experience—what I have seen and what tourists from anywhere in the United Kingdom will experience if they go on holiday anywhere within the European Union—is of fags, which invariably come from other parts of the European Union, being sold on street corners.

Sir Michael Spicer: How, then, does the hon. Gentleman explain the fact that when Canada, Switzerland and Sweden reduced their duties, smuggling fell dramatically?

Mr. Campbell-Savours: I do not know the answer to that, but I am sure that there is an explanation that is consistent with the case that we are advancing in the Chamber today. I have not studied the evidence. All I know is what I have experienced and witnessed, over most of my lifetime, within the European Union. The hon. Gentleman may talk in terms of what we are seeing today being a phenomenon of today, but it is not. It has been going on since I was a child, throughout Europe.

Mr. Swayne: I acknowledge that the hon. Gentleman is right to say that, as long as a differential exists, people will trade; but, obviously, the number of people trading will be determined by the size of the differential and the profitability. Is not the phenomenon that the hon. Gentleman describes something to do with the cultural background in Europe, which, as he said, stretches back a long way? Nevertheless, this type of trading is a relatively new phenomenon, at least in this country.

Mr. Campbell-Savours: When the hon. Gentleman starts talking about cultural backgrounds, I tread a little warily, because I know roughly the area into which he is daring to venture.
There is one other aspect that I wanted to raise in my brief contribution.

Mr. Bercow: Will the hon. Gentleman give way?

Mr. Campbell-Savours: No. Let me go on, because I do not want to hog the debate.
I have in my hand a brief that comes from the Treasury, which I believe is available to most Members. It says that the Treasury will invest in technology, including large-scale X-ray scanners that can look inside lorries and freight containers.
I hope that, when the Minister replies to the debate, he or she will address the issue of these scanners, because I believe that that is an interesting development. I am told that such scanners already exist in the United States of America, and that they really work. I should have thought that if there is a technology that provides for the use of scanners in identifying large hauls of cigarettes in truck containers, it should be used.
I am told that the revenue lost from a truck container can be as much as £1 million per container. If we have that technology, the trade will soon collapse. If scanners are in operation, transport operators who contract companies to carry such loads from other parts of the European Union know that they risk losing their tractor units and trailers—many of which are worth between £120,000 and £150,000 per unit—if they are found to be carrying cigarettes. I am told that we are to have a dozen scanners. I only wish that we were buying more; I would have 50, as they will be a particularly good investment.
The trade is not made up entirely of the little guys who wheel their trolley off the P&O ferry at Dover and sell fags locally on the motorway. The real trade is the big 40 ft trucks crammed full of aluminium boxes, and people get away with it because we do not have the resources to check on such loads.

Mr. Letwin: Does the hon. Gentleman think that smugglers' propensity to invest in materials such as lead to counteract the X-ray would be increased or decreased if the differential were reduced?

Mr. Campbell-Savours: That is an interesting question. If one puts enough lead in a 40 ft truck-trailer to cover boxes full of fags, it will probably weigh down the whole vehicle, as will be evident from its axles. Regardless of that, it is extremely easy to develop technology capable of locating lead. If one wants to find people who are carrying fags, all one has to do is use a bit of equipment that can identify lead. Lead on top of someone's load means that they are carrying fags.
We shall therefore introduce the necessary technology. I predict that the policy will work and will be extremely successful if we invest in such equipment. If we increase the quantity that is available for use for detecting cigarettes and other products at British ports, smuggling will be cut dramatically, so I hope that my hon. Friends will go down that route.

Mr. Edward Davey: The whole Committee is grateful for the comments of the hon. Member for Workington (Mr. Campbell-Savours).

I cannot speak as eloquently as he does, but I support his argument that scanners are a key tool for the Government in tackling smuggling.
Page 6 of the Government's document, "Tackling Tobacco Smuggling" gives statistics on tobacco smuggling in 1999, estimating that £1.4 billion of the £2.5 billion that was lost—or more than half of last year's lost revenue—was through freight consignment smuggling, which scanners are designed to tackle. The Government are quite right to go down that road, as the hon. Gentleman pointed out. However, he was a little too generous to the right hon. Member for Bromley and Chislehurst (Mr. Forth) who, in the final knockings of his speech, seemed to be suggesting that Spain should improve its physical controls on tackling smuggling, but that that was not the right policy for Britain. That was rather inconsistent and incoherent, and not typical of how the right hon. Gentleman usually argues his case.
The right hon. Member for Wells (Mr. Heathcoat-Amory) said that the Conservatives are certain that the only solution to the matter is to cut duties. The hon. Member for Broxtowe (Dr. Palmer) asked why that is so and what motives lie behind Conservative policy. He suggested that the Conservative party may just want to cut smuggling and is not worried about the revenue. Perhaps it wants to promote drinking and smoking. We need to know the real reasons for Conservative policy, which, if I understood the right hon. Gentleman correctly, is based on the need to protect revenue.
The Opposition are saying that, if duty is cut, there will be increased revenue. That is like applying the Laffer curve to indirect taxation. That seems to be the key to their argument. If they are saying that, by cutting duties, we shall cut cross-border smuggling, but that that might have a negative revenue effect, we might all agree. If we wanted to spend money solely on cutting cross-border smuggling, we could all agree that cutting excise duties on tobacco and alcohol would almost certainly have some impact on that smuggling. We are not sure of the scale, but it would certainly have an impact.
When we consider the revenue impact of cutting duties, the analysis is rather more complicated. I refer to an article in "Fiscal Studies" of September 1999 by Crawford, Smith and Tanner, entitled "Alcohol Taxes, Tax Revenues and the Single European Market".

Mr. Bercow: Riveting reading.

Mr. Davey: It is an important read for this debate because it brings some economic literacy to it. It considers real numbers and models them properly. It focuses also on own-price and cross-price elasticities of demand for smuggled products. It works out the impact of cutting duties on demand and thus on the tax take. I accept that the study focuses on alcohol and the effect of cutting excise duties on it. The authors, in estimating the various price elasticities of demand in the mid-1990s in Britain for various alcohol products, show that, if we were to cut duties on beer and wine, the revenue would decrease. That is a clear and unambiguous conclusion in an economically literate study.

Sir Michael Spicer: As the hon. Gentleman is so economically literate, he will know that the elasticities that are assumed by, or produced from, the report have been hotly disputed by other people.

Mr. Davey: I am grateful for the hon. Gentleman's intervention. I have spoken to representatives of the


industries concerned about these matters. I have yet to see a detailed economic knock-down of the price elasticities. I have heard some anecdotal evidence against them, but not detailed economic facts. The debate should focus on the facts and not on pure dogma. We need to introduce into it some objective cool-headed studies, and I believe that the study to which I have referred is one.

Dr. Palmer: Given the existence of the report from a respected independent body, does the hon. Gentleman agree that amendment No. 1 should fall? It merely demands an independent report on the effect of liquor duties on smuggling.

Mr. Davey: The hon. Gentleman makes a valid point.
In trying to explain the thinking behind the report and the analysis, the authors of the report consider two effects. First, they focus on the effects on revenue when we cut taxes. One effect is to raise demand as people who were consuming illegal goods start consuming goods with duty paid, which adds to the tax base. If we cut excise duties, we might find more people demanding the product. That is the ordinary demand curve effect. In those terms, revenue would be raised as a result of what the Conservatives are proposing.
The effect that outweighs that, as set out in the study, is that the lower tax per unit of sale resulting from a cut in excise duties more than offsets the gain in tax revenue from the higher demand. Unless a cut in excise duty had a great effect in increasing sales and demand, the second effect would always outweigh it. Previous studies have backed up the findings of the Crawford, Smith and Tanner study and point in that direction.
It is interesting that the report suggests that the duty on spirits is a revenue-maximising rate, so that, if duties were cut, we would see a fall in revenue. A distinction is made between different alcohol products but there may be a fall in revenue when duties reach a certain level, and the Government have recognised this.

Liz Blackman: Is the hon. Gentleman aware that the Canadian experience revealed exactly the same effect? By cutting duty, Canada has forgone revenue on tobacco.

Mr. Davey: I am grateful for the hon. Lady's intervention. I was not aware of the details of the Canadian experience, but perhaps I should have been.
We need to know from the Conservatives what lies behind their argument. Do they want to cut cross-border smuggling? If that is their position, it is a valid one. When they add up their expenditures when preparing for the next election, they may want to say to the British people that a key priority is to spend £1 billion, or whatever the sum may be, on cutting cross-border smuggling by lowering duties, and that that priority goes before the health service, schools and the police. However, if they are saying that cutting duties on beer and wine will increase revenue, they have no case.

Mr. Heathcoat-Amory: I shall summarise our position for the hon. Gentleman. We have a failed health policy and we want a successful one. We have a failed criminality policy and we want a successful one. We have

a failed revenue policy and we want a successful one. The Government's response is to make a bad situation worse by opening up the duty differential, which will make all those problems worse.

Mr. Davey: For a second I thought that the right hon. Gentleman was in a time warp and was describing the record of the Conservative Government. I do not want to defend this Government's overall record on health. Indeed, my colleagues and I have criticised it. It is difficult to criticise overall their record on finances because there are huge surpluses which are growing by the day. Their record on criminality is certainly questionable, especially in terms of numbers of police officers. However, given the previous Government's record in these areas, the right hon. Gentleman has a nerve. He failed to address earlier whether the Conservative party is arguing that a cut in excise duties will increase revenue. If the Opposition are advancing that argument, the Committee is entitled to know on what basis they are doing so. The evidence from Canada and from the independent economically literate study produced by the Institute of Fiscal Studies suggests that what is being said by those on the Opposition Front Bench is completely wrong.
One might be tempted to suggest that the Opposition are being slightly opportunistic and that, during a week when there will be elections, they are trying to be populist, as their Leader has tried to be populist on various other areas of policy. The Leader of the Opposition has failed, and I believe that the Opposition will fail tonight because they have failed to make their point.
I do not have a study to quote from when we come to consider whether reducing duties on tobacco would increase revenue. I do not know of a study that has gone into the various own-price and cross-price elasticities that need to be computed if we are to work out the effect of reducing duties. Does the Minister know of a study that has considered own-price and cross-price elasticities and the effect of a cut in the duties on tobacco in terms of the overall tax yield from tobacco? If such a study does not exist, does the Treasury intend to commission one? Such an independent study would be important in informing the debate. If we have reached the top of the curve or gone beyond it in excise duties on tobacco, and if a cut would yield more revenue, my right hon. and hon. Friends and I might well reconsider our position. We are not dogmatic about it. If a cut in duties would have a beneficial effect all round for health policy and revenue raising, for example, we would be more than happy to support such a move, but there is no evidence to suggest that that would be the effect.

Mr. David Ruffley: Will the hon. Gentleman clarify one point? Is he saying that the Government of this country should base their tax and excise duty policies on the work of Crawford, Smith and Tanner?

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Mr. Davey: I am certainly not saying that, but I am advocating that the Government base their tax policy on objective, independent, well-founded and economically literate analysis. We have not had that from those on the Conservative Front Bench.

Dr. Palmer: Is the hon. Gentleman not being a little optimistic in thinking that a further study would help to


clarify the debate? As we have heard from the interventions of Conservative Members, even when there is an independent report, they do not want it. They want an independent report whose conclusions they like and, if they get one whose conclusions they do not like, they ask for another report.

Mr. Davey: The hon. Gentleman has a point, but I do not want to rubbish independent and objective reports. We need more of them, because this is an important social, economic and fiscal issue. The Government, and the previous Government, reacted to the initial findings on the effect of cutting duties on alcohol by freezing the duty on spirits and by keeping the increases in excise duties on beer and wine to the rate of inflation. That is a sensible policy that evidence from independent and objective studies seems to back up.
However, at the moment, I do not have to hand a similar study considering the price elasticities of demand for tobacco, and such a study is necessary for this debate. It could provide it with some rigour and a framework, so that we do not have to clutch figures from the air or make wild assumptions. Surely, given the brilliance of economists and the civil service in this country, we can try to obtain the facts and publish them, so that the debate focuses on the correct issues.

Mr. Bercow: At the start of his speech, the hon. Gentleman appeared to suggest that he accepted that a large differential would tend to favour the smuggler. He therefore dissociated himself from the position advanced by the hon. Member for Workington (Mr. Campbell-Savours), whose continental meanderings were enjoyable but, I fear, no substitute for empirical evidence. The hon. Gentleman now appears to be telling us that he does not know what the empirical evidence is. Therefore, can we establish beyond doubt the Liberal Democrats exact position on excise duties on tobacco as of 2 May 2000? Does he think that they should be higher, lower or stay the same? When will he learn to play his cards right?

Mr. Davey: The position is simple, and I will answer the hon. Gentleman directly. In the Lobby tonight, we will support the Government's position on increasing excise duties on tobacco and alcohol. I hope that that answer helps him with his troubles. However, he has mixed up two points. I agree with him that a larger price differential provides a greater incentive to smuggling. That is a law of economics, as the hon. Member for West Dorset (Mr. Letwin) said. However, it does not follow from that—the evidence is not yet forthcoming—that a reduction in duties would lead to an increase in revenue or that we should back an ill-thought-through and ill-considered policy that would be bad news for the health service, our schools and the police.

Mr. Bercow: I am deeply disappointed by the hon. Gentleman's reply. I had hoped against hope—oh, naive soul that I was—that he was a genuine libertarian. The late John Stuart Mill, for one, would be ashamed of him.

Mr. Davey: May I refer the hon. Gentleman to John Stuart Mill?
If a study on the price elasticities of tobacco were carried out so that the debate was rather more informed than it has been in some quarters, we might find that a

cut in duties might increase revenue yields. However, we might still decide that we wanted to increase the duty because of other factors such as health policy. As the hon. Member for Erewash (Liz Blackman) pointed out, the evidence from countries with low rates of duty is that, because of sophisticated organised crime, smuggling will continue even if the differential is quite small. There is bound to be a differential with other countries, and particularly with those outside the European Union, and organised crime will arbitrage on the differential between the different tax rates and will try to exploit it.
Whatever the policy on reducing duties, we might decide that our first priority should be to invest in anti-smuggling devices such as the national network of scanners to which the Government are rightly committed. We might decide that we need more Customs officers and that we would not want to cut their numbers as the Conservatives did when they were in power. We have not heard them apologise for doing that and for reducing the resources available to Customs and Excise, but perhaps they should have done so.
Policies other than cutting duties can be used to reduce smuggling. If they are successful—we should all hope that they are—there might be an increase in the revenue yield. The policy of fiscal marks on cigarettes appears in clause 14, so I shall not dwell on it. However, it may be a useful aid in the attack on smuggling. It is possible that we shall want to debate the details of the policy's implementation, but properly marking the packs on which duty has been paid is a sensible way forward. Making the punishments for smugglers appropriate and seizing their assets is another approach. When organised crime is involved, custodial sentences should be available to punish the criminals properly.
I have concerns about aspects of the Government's policy. In particular, I am concerned about the speed of implementation. Several reports have been produced, but we are waiting for more officers and for the scanners. The Government have been in power for three years and they should be getting on quickly with anti-smuggling proposals, monitoring their efficacy and helping the debate by producing objective reports that provide an economic analysis that is stronger than that we heard from those on the Conservative Front Bench. Such reports would enable us to assess the effect of cutting duties on the Exchequer.
Liberal Democrats will, at least for this year, support the Government's approach to tackling smuggling. We support the measures that I have outlined and will ensure that the Revenue's tax base is protected. However, over the next year or two we want the Government to consider the duties' effects in more detail than they have to date, so that, when we revisit this issue this year and the year after that, the debate will be rather more informed than it has been tonight.

Sir Michael Spicer: Successful or not, the increases in excise duties are an integral part of the Government's policy to raise the overall level of taxation as a percentage of gross domestic product. The fact that the Government are increasing taxation as a whole as a proportion of GDP is now an established fact in the Red Book, and even if, under the convention uniquely invented by the Government, one includes the working families tax credit as a tax deduction, taxes as a whole are going up.
To return to a point made by the hon. Member for Broxtowe (Dr. Palmer), the irony is that the burden of the overall level of taxation falls on indirect rather than direct taxes. As a Conservative, I have no particular objection to that—it fits in very much with my overall philosophy—but it must be a cause for shame among Labour Members. The process of increasing excise duties is part of that overall strategy.
The strategy is necessary because of the explosion in the rate of increase in public spending and planned public spending that the Red Book also recognises. It is soaring—there is no question about that. The Select Committee on the Treasury recently established the facts. In 2000–01, public spending will rise by 6.7 per cent.; in 2001–02, it will rise by 6 per cent.; and in 2002–03 by 13 per cent. It is therefore not surprising that bodies such as the International Monetary Fund recently pronounced that Britain's economy was at risk of overheating and that the aim of Government policy ought to be to take the pressure off interest rates. The IMF stated that in these circumstances it would be ideal for fiscal policy to take the burden off monetary policy, and the fact that that has not happened is a matter to be regretted.
All that is part of a context recognised by everyone outside the present Government. Expenditure is soaring and taxation policy is inevitably following it. It so happens that taxes are being raised through indirect taxation, particularly excise taxes.

Mr. Edward Davey: Can the hon. Gentleman tell the House what expenditure he would cut in order to tighten fiscal policy?

Sir Michael Spicer: I would take a totally different approach to public expenditure. There is the question whether private resources should be used for public services to a far greater extent than is the case. It is extraordinary that a Government who ostensibly support those most in need, but not so much those less in need, do not accept—they may do so secretly, but not publicly—the need for private resources in public programmes. That is inevitable and will have to be recognised one day.

Mr. Davey: I am grateful for the hon. Gentleman's reply. Can he tell me whether it is in respect of pensions, police, schools or hospitals that he believes the private sector has most to do?

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord): Order. We are straying rather wide of the amendment.

Sir Michael Spicer: I bow to your constraints, Mr. Lord, although I would be happy to debate the topic at length.
The rise in excise duties is a matter of great interest. The rise in tobacco duty is self-evident. The change is 8.41 per cent. However, in the case of alcohol, as my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) mentioned, the so-called indexation to inflation is a strange phenomenon and will have to be explained by the Government.
Throughout the Red Book and throughout the discussions that we on the Treasury Committee have with the Monetary Policy Committee, the argument is that the rate of inflation—RPIX—is currently below the target level of 2.5 per cent. and is likely to remain so. Nevertheless, the Government say that indexed alcohol duty will go up by 3.4 per cent.
There may be all sorts of calculations involved, but the basic inflationary index used to govern inflationary policy and thus to determine most of the UK's monetary economic activity—the RPIX index—continues to be well below the target level of 2.5 per cent., so it is extraordinary that an indexation device is suddenly introduced, whereby excise duties on alcohol are put up by 3.4 per cent. The Government will have to tell us more about that in the course of the debate. [Interruption.] I am glad that the Minister is sending his assistant scurrying away, presumably to get some answers.
6.15 pm
Amendments Nos. 1 and 2 highlight the importance of the independent analysis of the effect of excise on smuggling. The Treasury Committee, and especially the Sub-Committee which I chair, spent a great deal of time on the matter. It took evidence and on 8 February published its report on HM Customs and Excise. Paragraph 64 is directly relevant to the debate on the amendments. It states that in March 1999, in the pre-Budget report,
the Chancellor of the Exchequer announced that there would be an "independent evaluation of the strategy and measures deployed to tackle excise duty and fraud and evasion …"—
no mention there of it being a personal report.
In the 1998 pre-Budget report, almost exactly the same promise was made. That is partly the answer to the hon. Member for Kingston and Surbiton (Mr. Davey), who spoke about physical constraints on smuggling. The 1999 announcement was an almost exact repetition of the offer of an analysis of physical constraints on smuggling in the previous year's pre-Budget report. In 1999 Mr. Taylor was put in charge of the report. The results of his evaluation apparently influenced the measures taken in the 1999 report and in the current Budget.
Because of the importance of the report in determining Government strategy on excise duty, particularly in relation to smuggling, we—the Treasury Committee—
requested sight of Mr Taylor's report to the Chancellor so that we could assess whether the measures announced by the Chancellor to deal with tobacco smuggling fully met the evaluation's recommendations. We were also concerned to investigate how Mr Taylor had undertaken his review, given that witnesses from several key alcohol and tobacco trade and retail associations told us that they had not been consulted by him. We were told—
this is the point raised by my hon. Friend the Member for Sevenoaks (Mr. Fallon)—
that the advice tendered by Mr Taylor was "personal and confidential" to the Chancellor and could not be made available to Parliament as a result.
We continued:
We consider it unacceptable that the Treasury should commission a review of an important area of Government policy, and announce policy measures apparently based on the outcome of that review,


without allowing Parliament access to the review's conclusions. We recommend that the Chancellor make available for Parliamentary scrutiny the results of Mr Martin Taylor's recent evaluation of Government policy to tackle tobacco smuggling.
That is what lies behind the two amendments.

Mr. Campbell-Savours: If the Taylor report included material that was based on intelligence, would the hon. Gentleman still be in favour of publishing it?

Sir Michael Spicer: There are always issues associated with intelligence, but the Government were not prepared to consider publishing any part of the report, or to produce a summary of the analysis that led to the conclusions. They were not prepared to give Parliament any insight into an apparently substantive and significant contribution to Government policy which had been announced in public. Confidential matters relating to security and intelligence could have been deleted. Parliament accepts that when such reports are published, certain references to intelligence sources and techniques will not be disclosed.
It is scandalous that the report was not published. I should have thought that that was common ground on both sides of the House. I should have thought that the hon. Gentleman, who feels strongly about parliamentary matters and speaks against the Executive on occasion, would consider it wrong that a major report which was publicly announced should not be a public document. Probably because it reached conclusions that the Government did not wish it to reach, the curtains came down. I do not believe that that had anything to do with information or intelligence. The fact that the report came to the wrong conclusions from the Government's point of view made it unacceptable in the public domain.

Mr. Campbell-Savours: I do not know what was in the report. I do not know whether it dealt with intelligence matters, but I presume that it did. If, on a balance of judgment, Ministers decided that a document would be worthless unless it included that intelligence material, which it cannot include if it is to be published, how can one challenge that judgment? A similar decision would have been made by Ministers in the previous Government. I heard them say that when I used to sit on the Opposition Benches.

Sir Michael Spicer: If the matter had such implications for national security and the intelligence services because of smuggling, the Government could have made that clear, but they did not. They claimed that the report was a personal matter for Mr. Taylor and the Chancellor. If the hon. Member for Workington (Mr. Campbell-Savours) is right—I suspect that he is not—the Government should say that the report had not been published for security reasons. We could have considered the matter and Parliament could have decided whether it had implications for national security. However, the Government never said that the report was sensitive because of national security or the way in which the intelligence services work; they said that the report was personal to the Chancellor. I believed that the hon. Gentleman would find that unacceptable.

Mr. Forth: Does my hon. Friend believe that if the ill-fated, so-called Freedom of Information Bill ever reaches the statute book it will force the publication of such taxpayer-funded reports?

Sir Michael Spicer: My right hon. Friend makes an interesting point. The report on Customs and Excise gives an example of another Government report that has been kept secret and unpublished, and specifically refers to the context that my right hon. Friend described. The reports states:
It is extremely disappointing that, as the Freedom of Information Bill began its passage through Parliament, Customs and Excise refused us access to a six year old report on a matter of departmental organisation central to our present inquiry, far removed from party political controversy or national security—
to answer the hon. Member for Workington—
defence or foreign policy concerns.

Mr. Campbell-Savours: How does the hon. Gentleman know that?

Sir Michael Spicer: Because that is the clear implication. The report simply considered whether the Customs and Excise service could be made more efficient, perhaps by amalgamating it. No one has ever told the Select Committee that security or intelligence matters were involved. If that had been said, we could have considered it. My right hon. Friend the Member for Bromley and Chislehurst (Mr. Forth) is right to say that, despite the hoo-hah and hot air that surrounds the Freedom of Information Bill, six-years-old papers of no party political import are suppressed. Those papers were drafted by the previous Administration, and the Government probably believe that they reached the wrong conclusions.
Such suppression is wrong and a good reason for accepting amendments Nos. 1 and 2, which are eminently sensible. They are not especially party political and they deal with the extent to which Parliament should be allowed to scrutinise the Executive.

Mr. Michael Fallon: Before my hon. Friend leaves the point about whether the Taylor report can be construed as personal, can he explain to the Committee how a report which was commissioned by a Minister who is a public official and which was prepared for a public Department for public policy making, can be described as personal to the Chancellor of the Exchequer?

Sir Michael Spicer: I cannot think of a reason. As my hon. Friend rightly says, the Taylor report is on a vital public issue. I cannot understand how it can be personal to the Chancellor.

Mr. Letwin: Does my hon. Friend agree that the report might be construed as personal because it was personally embarrassing to the Chancellor?

Sir Michael Spicer: My hon. Friend may be right, as he so often is.
I want to consider the general thrust of the argument of the hon. Member for Kingston and Surbiton. He said that revenues would increase, and that the revenue take was necessary for all the projects that he wants to implement. He is a big spender and taxer; increasing revenue is therefore a good thing from his point of view. He said that all the Institute for Fiscal Studies reports on alcohol showed that that would happen and that, despite the leakage, the overriding thrust of policy would be to raise revenue.
The Institute for Fiscal Studies is undertaking a similar study on tobacco. Doubtless it will be as easy to pull apart as that on alcohol. The elasticity arguments in the report are highly subjective. No one knows from where they have been plucked. They are not empirically constructed because the IFS does not have the resources for that.

Mr. Edward Davey: The hon. Gentleman criticises the Institute for Fiscal Studies, which is well respected. I did not realise that he believed that it was so bad. It took its data from the family expenditure survey of 1979–96.

Sir Michael Spicer: When making a historical analysis of elasticity, one makes an assumption and includes it in the model that one is constructing. Assumptions based on historical data may not apply to the future. In the Canadian example, the assumptions applied to the future, but in the Swedish example they did not. Elasticity arguments are always subjective.

Mr. Davey: If the hon. Gentleman reads the report, he will find that the research was controlled by, for example, ascertaining whether elasticity in the south-east of England was different from that in the rest of the country. That was achieved by ascertaining whether price elasticity was different before the single market began and after it was established. The elasticity was found to be the same. The hon. Gentleman's argument is therefore not borne out by the facts.

Sir Michael Spicer: The hon. Gentleman is well versed in such matters. I am sure that he will accept that elasticity arguments in such studies, especially when based on historical data, are often highly subjective. That is especially true in the case that we are considering.
In his contribution, the hon. Gentleman claimed that the beneficial—in his view—revenue effect of all the extra dosh and the great expenditure plans, which he will doubtless beat the Labour party to effecting because the Liberal Democrats want to spend even more money than the Labour party, were tremendous and not to be stopped. The only method therefore of dealing with smuggling was by physical means, such as X-ray scanners. The hon. Member for Workington wanted 50 and the Government want 12; doubtless the Liberal Democrats are somewhere in the middle.
The hon. Members for Workington and for Kingston and Surbiton claimed that smuggling would be prevented by physical measures. That would be wonderful if the empirical evidence bore it out. However, in the 1998 pre-Budget report, the Government produced a list of physical measures such as X-ray screening, CAT marks, proposals for licences for pubs and related premises and provisions for punishing retailers for smuggled goods. That list was published in 1998 and repeated in 1999.

Mr. Campbell-Savours: Do the measures work?

Sir Michael Spicer: That is the whole point. During that period, smuggling has taken off.

Mr. Campbell-Savours: rose—

Mr. Beard: rose—

Sir Michael Spicer: Many of the physical means have been implemented. We must grant the Government that. The Government and Customs and Excise have tried to increase—[Interruption.]

The Second Deputy Chairman: Order. We cannot have continual interventions from a sedentary position. If the hon. Member for Bexleyheath and Crayford (Mr. Beard) wants to intervene, I should be grateful if he did it in the conventional way.

Sir Michael Spicer: I shall give way shortly. However, I am trying to make the point—I hope calmly and collectedly—that the physical measures have been introduced and have been used increasingly. However, smuggling has increased much more quickly than the rate of the measures' introduction.

Mr. Beard: The hon. Gentleman claims that the efforts to stem smuggling have been ineffective. However, it was revealed in the Treasury Committee's inquiry into HM Customs and Excise that the previous Administration cut by 300 the number of officers who dealt with smugglers. The previous Administration had given up trying to control smuggling.

Sir Michael Spicer: There is no question but that both Administrations have tried to introduce new methods, methodologies and technologies to customs, but smuggling has increased rapidly even though more and more technology has been put in the system, particularly during the past two years over which, apparently, the Government have increased the physical resources going to Customs and Excise. There has to be at least a question mark over whether reliance on physical constraints and physical investigation as opposed to excise measures will be effective.

Mr. Campbell-Savours: I understand that the hon. Gentleman chaired the Treasury Committee Sub-Committee that considered the issue, so can he give a clear answer to my direct question: do the scanners that we are to buy work?

Sir Michael Spicer: I do not doubt that a scanner will scan effectively and will find—[Interruption.] We must deal with the question whether we will ever have enough scanners and whether the increased traffic—large vans from outside the European Union and the white van trade from inside—will swamp them, as is the case at present. The invasion flood of contraband articles is such that we cannot hope to control it physically. That is the argument. The hon. Gentleman may want more than 50 scanners, and he may have to have 500 or 5 million, but, given the massive differentials in cigarette duty, especially outside the EU, all the experience is that such measures are not effective or are at least questionable.

Mr. Swayne: May I ask my hon. Friend about these scanners? If, as is increasingly the case, young men go to France for an agreeable weekend and buy, ostensibly legitimately, a large number of cigarettes—presumably for their own consumption—and then sell them in pubs in the south-east and parts of rural Hampshire, what will the scanners do to deter such trade? Very little, I suspect.

Sir Michael Spicer: I am grateful to my hon. Friend, who makes a good intervention.
I put a question to the hon. Member for Workington, which he did not answer. Some countries have markedly reduced excise duties and, as a result, the position there has appreciated—smuggling has diminished considerably. Our country provides the example of increased reliance on technology accompanied by increased excise duties and a massive explosion in smuggling. We must properly ask whether there is substantive cause and effect between the rise in excise duty and the enormous increase in smuggling. That is why it is right for us at least to call for a proper investigation of the matter that should be made public so that we can debate it before determining whether the excise rate is correct.

Mr. William Ross: I have opposed the year-on-year tobacco duty increases under Conservative and Labour rule, not least because Northern Ireland's tobacco industry suffers grievously as a result of them. I have also always opposed the constant ratchet effect in respect of road tax and the price of road fuel. We see Government policy on tobacco taxation as having three aims: increasing revenues, reducing consumption and preventing children from purchasing cigarettes. The Government's present approach is to increase tax by 5 per cent. above inflation, but that simply is not working; revenues have been undermined, tobacco consumption is rising and smugglers have no qualms about selling to children. For those reasons, we have put our names to some of the amendments and we certainly support the others.
Despite what the hon. Member for Workington (Mr. Campbell-Savours) cheerfully told us, smuggling is not represented by someone walking across a border with a bag on his back; it is a vast organised criminal activity. This island has the advantage of a water barrier to the north, south, east and west, but Northern Ireland has the disadvantage of being tied in to an island with a land frontier. Therefore we have experience of fuel smuggling. Although that is not covered by the amendment, the same problems arise and we know the damage that has been done not only to revenues, but to the unfortunate individuals who try to run businesses selling that product in Northern Ireland when a much lower tax rate is in force a few yards away.
The tobacco industry welcomes the Government's proposed measures to combat smuggling, including the 950 new Customs officers, but everyone in the industry in Northern Ireland believes that the tax rate will only encourage it. We are trying to stop smuggling, but we are also promoting a tax policy that encourages breaking the law, and even by the Government's own estimate, the new measures will reduce smuggling by only 10 per cent. at best.
United Kingdom taxes are the highest in Europe. Sweden had the second highest until it made a 26 per cent. reduction because of smuggling. Denmark recently issued a statement pledging to reduce taxes by 2003 to bring it into line with its neighbours, and Hong Kong has issued a similar statement. The measures taken by Canada to change the economic environment in which its smugglers operate have already been referred to; legal sales fell to 1980 levels and smuggling all but disappeared. People may want a particular brand of tobacco or cigarettes as opposed to another. That is a question of personal choice. However, smuggling operates not on brand preference, but purely on price differential.

Mr. Michael Clapham: The hon. Gentleman made a distinction between Ireland and Great Britain, saying that Ireland, which has a land border, is much more vulnerable to smuggling than an island with port facilities. Does he agree that an extra 1,000 officers and X-ray facilities may allow an island to control the racket to some degree, and that that would have an impact on tobacco sales inland? Will the X-ray scanners and the officers have an effect?

Mr. Ross: One appreciates the fact that the increase in the number of officers and the new technology that is coming on stream will have an effect, but the tobacco industry in Northern Ireland does not believe that it will have the impact for which the Government evidently hope. Not all the tobacco that arrives in Great Britain necessarily comes across to Dover or even into England; some could come to Rosslare and go out through Larne. Gallaher's in Ballymena found that the hand-rolling tobacco that it had produced over many years went out of the United Kingdom legally and on to the continent. However, 10 days after it had left the factory, it was on sale on market stalls in and around Belfast. The Government know that, and we have been telling successive Governments about it for years.
Smuggling is a big industry and we should not be under any illusions about what has happened. My information, which I am sure has been made available to other hon. Members, is that 3 million people in the United Kingdom smoke cigarettes on which UK duty has not been paid. I understand that the Government have admitted to losing £2.5 billion in revenue per annum; at least, that is what they stated in their pre-Budget report, published last November.
Amendment No. 7, which has not been selected, would return taxes to pre-Budget levels. Amendment No. 8 would reduce the pre-Budget price of 20 cigarettes—if we assume that to be £3.92—by £1, to £2.92. It would also reduce the pre-Budget price of £8.05 for 50 g of hand-rolling tobacco to £3.50. In other words, it would bring retail prices down to levels that would remove the financial incentive for people to buy black market products. According to the industry, that, coupled with the £209 million worth of Government measures, would eliminate the black market altogether.
As has been pointed out, owing to the substantial difference between United Kingdom and overseas tobacco prices, smuggling offers potentially high profits. The hon. Member for Workington mentioned the chap carrying a sack of tobacco products across the border from Switzerland to Italy. I suspect that if he did that seven days a week, he would have a reasonable wage at the end of the week, even given the relatively small price differential. How much would that be multiplied given the differentials between the Continent and the United Kingdom? It is worth the while of organised criminal gangs to become involved in such activity, and we believe that they have done so.
Tax currently accounts for more than 80 per cent. of tobacco retail prices. Since 1997, the price of a typical packet of cigarettes in the United Kingdom has increased by more than £1. A typical packet of 20 costs the UK smoker well over twice what it costs his counterpart in Belgium or France, while the roll-your-own smoker pays nearly four times as much. The black market price is about £2.50, which enables large profits to be made from smuggling.
Revenue losses resulting from tobacco smuggling rose to some £2.5 billion between 1998 and 1999. According to the pre-Budget report, that amounts to about 25 per cent. of all tobacco revenue due. Since 1997 some £5 billion of tobacco tax revenue has been lost, and, as I have said, the retail price of a packet of cigarettes has risen by £1.
Hon. Members have pointed out that the revenue fell last year, but as last year's Red Book will show, a fall was forecast not just for that year but for coming years. It all comes down to a simple tax problem that has plagued every ruler since taxes began. Once the amount of tax that people will pay relatively willingly has been exceeded, Governments encounter increasing resistance from taxpayers, who will therefore try to reduce their taxes.
The really wealthy, of course, have always managed to reduce their taxes, not so much through tax avoidance schemes as by overseas trusts, for instance; that is perfectly legitimate. However, the small man—the ordinary citizen—will buy his petrol and pay the high price for it. He will grumble, because he will know that most of that will go into the Chancellor's pocket, but he will pay, because he can do no better. If you live in England, it is not worth your while to drive across to France to fill your car; if you live in Newry or Londonderry, it is worth going into the Irish Republic.
Tobacco, however, is a great deal lighter, and a great deal more valuable than fuel in terms of volume. It is easier to transport and easier to hide, and the profits are vast. I do not know—although I am sure that if the Minister puts his mind to it, he can soon find out—how many packets of 20 cigarettes will go into a 40 ft container, but the revenue lost on that one container would probably go a long way towards paying for the lorry that is transporting the cigarettes. If someone could get a few loads through, even if he lost the lorries it might still be worth his while. I wonder what the economics really are; I am sure that the smugglers would take that into account.
6.45 pm
Let us be clear about the history. The smugglers began by importing hand-rolling tobacco. Currently, four out of five packets of hand-rolling tobacco consumed in the United Kingdom are smuggled in. Often, United Kingdom tobacco goes out and comes back again—tobacco that would normally have been sold in the UK. As I have said, much of it is prepared in Ballymena. In the United Kingdom, 50 g of hand-rolling tobacco costs £8.49; in Belgium, it costs only £1.70.
Years ago, management and trade union representatives from Gallaher's factory came to the House and told us that the market for smuggled hand-rolling tobacco had reached saturation point. The next target, they said, would be cigarettes, and they were dead right. We told the officials of not just the present but the last Government that was the position, and events proved us correct.
Our tax on cigarettes is the highest in the world. The legitimate cigarette market had decreased by 8 per cent. in 1998 and by 10 per cent. in 1999, yet cigarette smoking is increasing. Many millions of people are involved in the illegal cigarette trade, as suppliers and as buyers.

We believe that one packet in four consumed in the United Kingdom has been smuggled in, despite all the efforts to make smuggling more difficult by means of labelling and packaging.
I think that the path we have been treading is counterproductive, and will not work in the future. It is time to look anew at what must be done. When smugglers can sell for between £2.20 and £2.50 a packet of cigarettes that costs £4.17 in the United Kingdom, they will find a market. That has a corrosive effect on society, and on people's honesty. More and more people go along with it, saying, "It is only a packet of fags; it does not really matter." That, however, amounts to supporting criminal gangs, and in criminal activity, one thing leads to another.
We are talking not just about a loss of revenue, but about increased consumption, and easier availability of tobacco products to children. As we all know, smoking, drinking and drugs are the "in thing" among young people. That can be overcome only through education; the fact that a product is pricy, or the knowledge that it has been smuggled, adds an aura that will attract the young. There is a vastly increased level of criminality among millions of people. I think that activity of this kind will encourage non-compliance with other aspects of the law, contempt for the law and flouting of the law, and that that will have a damaging effect on the social fabric of the community.
The Chancellor estimated that the yield from his 5 per cent. real increase would be £235 million in the current financial year, but previous forecasts have been unreliable, and have underestimated the rapid growth in smuggling. Consumption has increased by more than 5 per cent. since 1995, and by 4 per cent. since 1997; the trend is up, not down. I think that there has been too much "spinning" with regard to tax increases, in an attempt to make political capital.
The Chancellor and the Prime Minister made great play of hypothecating £400 million of tobacco tax revenue to the NHS as part of the additional £2 billion that the Chancellor announced would be made available to it. I believe, however, that in a global tax system such as ours all the tax goes into one bucket, or pool, and all the spending comes out of that pool. The idea that it can be said that a particular element of taxation will benefit a particular spending Department is a nonsense—a swiz.
As far as I remember, the original road tax started out as something designed to pay for roads. If that had continued, the whole of Britain would be covered in tarmac today. That is the lesson that every Member should learn. Hypothecated taxation is smoke and mirrors. It does not work. All the Government have to do is to say that they are putting in £400 million from tobacco, and two years later they take out £800 million or £900 million.

Mr. Ruffley: The hon. Gentleman is developing a powerful argument. Is he aware that his arguments on the bogusness of hypothecation are strongly supported by the Institute for Fiscal Studies, a body that the Labour party, and, indeed, the Liberal Democrats, are so keen to pray in aid in these matters?

Mr. Ross: I have read different comments by that body, but the hon. Gentleman is correct to say that it recognises the smoke and mirrors in the whole hypothecation argument.
Having said that about the Chancellor, I have to say that his figures are being contested. I understand—at least, my researchers tell me—that in the November 1999 pre-Budget report, he announced the hypothecation of tobacco receipts. He said that the yield of a 5 per cent. real increase would be £300 million. Just before the March Budget, the Minister for Public Health talked of £250 million. In his Budget, the Chancellor spoke of £300 million, and on 5 April the Prime Minister told the House that the figure was £400 million—a figure confirmed by the Chancellor the following day.
In the light of the reliability of the statements by the people running the Government's finances, we need to view those figures with a certain caution. Few taxes are as counterproductive as those on alcohol, tobacco and road fuel. The policy that was embarked on a good many years ago has been shown to have run its course. It is time to think a new way forward.
I am sorry that the right hon. Member for Bromley and Chislehurst (Mr. Forth) has left the Chamber—[HON. MEMBERS: "He is still here."] Oh, yes, so he is. He was attacked for what he said about the different levels of taxation across borders, but I wonder, as I am sure he does, whether open borders and different levels of taxation can really co-exist.

Mr. Ruffley: In supporting amendment No. 1, I want to advance an argument from an important part of the British economy, the brewing industry—in particular, a distinguished company in my constituency, Greene King. I want to explore an argument that it has advanced. In its view and that of the analysts who advised it, their suggestions would reduce the pernicious effects of alcohol smuggling.
The margins on smuggled beer are such that smuggling could rapidly become much less profitable were there to be a cut in beer duty. Greene King argues that a cut of about 2p per pint would be enough, at the margin, to ensure that fewer smugglers would be prepared to run the risk of smuggling beer from France to this country and, in particular, to East Anglia. It suggests an initial cut of 2p to reduce the profit element from bootlegging. That is a modest enough proposal, bearing in mind the fact that, as has been observed in the debate, the excise duty on a pint of beer in France is equivalent to about 5p, whereas in the United Kingdom it is about 33p.
The tax regime for beer has not leapt into life since I May 1997. I am not inviting the Committee to believe that all the problems that beer producers are experiencing are due to policies set in the past three years or so. However, I am inviting it to recognise the clear fact that beer sales have declined over the past decade, which has led to closures of breweries and public houses. The figures do not make happy reading. Sixteen of the largest 85 breweries have either closed, or their closure has been announced, since May 1997. The Countryside Agency has recently warned of its concern on behalf of rural areas that, every week, six village pubs close.
I need no convincing of the genuine fear that publicans and licensed victuallers in my constituency of Bury St. Edmunds have about their future if the tax regime is not amended by a modest 2p cut in duty. I have visited country pubs in my part of Suffolk and the message is loud and clear: the Government should listen and entertain the possibility of duty cuts.
I do not wish to get into an arcane but doubtless interesting debate with the hon. Member for Kingston and Surbiton (Mr. Davey). I do not wish to logic chop about what Crawford, Smith and Tanner did or did not say in volume 20, issue No. 3, 1999, of "Fiscal Studies" about own-price elasticities or cross-price elasticities, save to say that my hon. Friend the Member for West Worcestershire (Sir M. Spicer) threw some serious spanners in the works of the hon. Gentleman's argument by observing that, in different countries, the assumptions on elasticities can be subjective.
It ill-behoves any hon. Member to base an indirect tax policy on one or two academic studies that do not prove to be conclusive. Intuition and basic economics suggest that there can be cuts in beer duty without necessarily seeing a decline in revenue.

Mr. Edward Davey: rose—

Mr. Ruffley: I did not want to go down this avenue, but the hon. Gentleman tempts me.

Mr. Davey: If the hon. Gentleman does not want to have the debate on price elasticities, how else does he want to decide the issue about whether the taxes should go up or down? Has he invented some new science?

Mr. Ruffley: Because of time, I do not wish to go into detail. I do not accept the hon. Gentleman's argument that if Crawford, Smith and Tanner say that the policy will lead to a decline in revenue, it must be so. It is one academic study, doubtless backed by some Treasury economist. For the hon. Gentleman to say that for all time and in all cases one academic study proves the case is not realistic politics. He is not living in the real world. I would like an argument, but I say merely that I do not accept that we can base a whole tax system on one or two academic studies.
The scale of the problem needs to be debated. The figures that the brewers and licensed retailers have produced on the volume of bootlegging into this country makes fairly depressing reading. For my region of East Anglia, I have figures on the destinations of white vans carrying beer. The estimate for the total number of vans travelling into London in 1999 was 12,690. Of the top 20 destinations, in my region the estimate for Chelmsford is 4,790 and for Peterborough it is 1,870. Those statistics are very real for publicans and licensed victuallers in my constituency. They think that the stuff is flooding into the centres of Chelmsford and Peterborough and percolating into market towns and surrounding areas in Bury St. Edmunds.
The evidence—[Interruption.] If the hon. Member for Kingston and Surbiton wants to witter away from a sedentary position, he is welcome to do so, but does he want to intervene?

Mr. Davey: indicated dissent.

Mr. Ruffley: The impact on the rural economy is such that Greene King must have a point. With beer duty set at the level that it is, it is a regressive tax hitting hardest those who can least afford to pay it. It impacts on the livelihood and viability of pubs, particularly those in villages. The rural economy, at the margin, is affected by that process.
7 pm
As we have heard from the hon. Member for East Londonderry (Mr. Ross), the high beer tax increases introduced by the Chancellor since the Government took office are having a corrosive effect on the United Kingdom's law and order regime, and in influencing whether individuals obey the law or succumb to the temptations that have been created to break the law. The Government said that they would be tough on crime and tough on the causes of crime, so the effect of their tax increases should give them some pause for thought. They say that they are tough on inflation, but every 1 p increase in beer duty increases the retail prices index by 0.15 per cent.
The Government are also happy to pray in aid the virtues—there are virtues—of the single-market regime, but their policy and practice on beer duty is deeply antipathetic to the European single market. The Committee will need no reminding of the Council of Ministers decision in 1992 that future beer duty changes should be directed towards achieving the common market rate of about 8p on an average pint of beer.
Most European countries have made considerable progress towards achieving the common market duty rate. Since 1992, France and other low duty countries have doubled or trebled their duty rates. Conversely, Sweden, Denmark and Norway have made considerable reductions to achieve the target rate. Only one country—the United Kingdom—has moved significantly away from the target rate. Nevertheless, the Government claim to be at the heart of Europe.
Although I do not agree with very much of what comes out of Brussels, I think that the United Kingdom Government should be taken at their word. If they are serious about the European single market and trying to make it work, they should listen to the voices of brewing and to people at Greene King. Ministers should intelligently examine the possibility of making modest cuts in beer duty—to save jobs in rural areas, to save our pubs and to maintain a vibrant village pub life in the United Kingdom.

Mr. John Swinney: The hon. Member for Kingston and Surbiton (Mr. Davey) wondered what might be Conservative Members' central proposition in this debate. I believe, after much careful listening, that their basic argument is that a lower differential in tobacco and alcohol prices between the United Kingdom and our European partners would reduce smuggling. Although that point is clear, I think that it significantly over-simplifies the argument. Even if the point could be proven—today, the Committee has heard enough conflicting evidence on the point to debate it endlessly—it does not provide a full explanation.
The decisions that a society makes on alcohol duty, tobacco duty, vehicle excise duty and road fuel duty—which the hon. Member for East Londonderry (Mr. Ross) dealt with in his speech—are based on a variety of perspectives and objectives. Revenue raising could be one of the Government's objectives in setting duty levels. Alternatively, duty levels could be set to try to generate a particular outcome.
The present and previous Governments have increased road fuel duty well in excess of inflation in an attempt to reduce vehicle use. However, as any hon. Member

representing a rural constituency could tell any Government, increasing that duty to achieve that objective is an utter waste of time, because our constituents in rural constituencies have no alternative to using their cars. Increasing that duty to achieve that objective has therefore been particularly useless.
Tobacco or alcohol duty may be increased to achieve other objectives, such as to improve public health, essentially by saying to people, "Smoking and drinking may not be terribly good for you, and you should think twice before spending your money on them."

Sir Robert Smith: Does the hon. Gentleman think that although the declared intention behind increasing those duties may have been based on health or environmental factors, the Treasury had its eye on the fact that it could make much more money by increasing them?

Mr. Swinney: That logic is absolutely irrefutable in relation to the road fuel duty increases that I have had to watch being approved by the House in my three years as a Member.
Specific tobacco or alcohol duty increases may have a particular purpose other than to stymie increased smuggling or to extend the price differentials between the United Kingdom and our European partners, while sending a message to people in our community that excessive drinking and smoking may not be good for them. There has been some confusion in the debate about the ideal level for excise duties and about how to deal with smuggling.
We have had some interesting exchanges on what could be done to reduce smuggling, and the hon. Member for Workington (Mr. Campbell-Savours) made a particularly lively comment on the number of scanners that could be used. However, in dealing with smuggling the starting point must be the maintenance of an effective Customs and Excise network properly to protect the access points to the markets in our community. As those of us who are familiar with the changes made by the previous Conservative Government will know, Conservative Members left the Customs and Excise network in tatters. I support this Government's attempts to try to restore some of that network, but I am sceptical that their action will be sufficient to tackle the problem.
Today, Conservative Front Benchers have dealt with the matter of alcohol sales to minors as though the problem has been caused only by smuggling. In fact, the cause of the problem goes much wider than smuggling. Our community's regulatory and legal systems must enable us to protect minors from gaining access to alcohol and tobacco products.
We have to ask ourselves two fundamental questions on the issue of excise duty. First, are we entitled to maintain duty differentials between this country and our European partners? I think that, unless we are all signed up to tax harmonisation—which I am not—we are entitled to maintain the differentials. Secondly, do we expect excise duties and the way in which they are determined to have a credible effect on the purchasing patterns of individuals in our society? I have been dismissive of the impact of road fuel duty on the fuel purchasing patterns of my constituents, who live in a rural area, because I do not believe that they have an alternative to using


their cars. However, I am fairly confident that excise duties could affect people's patterns of purchasing tobacco and alcohol products.
The core of the fair parts of the amendments tabled by Conservative Members—and of the comments made by the hon. Member for West Worcestershire (Sir M. Spicer), who made a compelling case—dealt with why the Taylor report should be put into the public domain. Today, we shall have to hear from Ministers a new, different and very credible explanation of why that report has not been made public. If publicly commissioned and funded documents are not to be made public as we enter the freedom of information age, I wonder what on earth that freedom of information age is all about. What is the new age about if not to provide us with an opportunity to examine the issues?
The heart of the freedom of information issue is whether the House will be able to have reasoned and measured debates that are based on evidence. We have to keep a very keen eye on the issue. If the Committee or the House refuses to look the evidence straight in the face, we shall not be serving the public particularly effectively. The Conservatives have not proved that there is an inextricable link between smuggling and levels of excise duty, but I should like more evidence to be in the public domain so that we can arrive at a proper judgment.

Mr. Timms: We have had an interesting discussion on the amendments. I shall briefly explain to the right hon. Member for Wells (Mr. Heathcoat-Amory) and the hon. Member for West Worcestershire (Sir M. Spicer) why the figure of 3.4 per cent. was used for revalorising excise duties this year. Every year since the general election, we have revalorised duties by the expected increase in the all-items retail prices index over the 12 months from the September before the Budget. Since the general election in May 1997, the forecasts have been lower than the outturn, so the duty increases have been less than they would have been if we had used the actual inflation figure. Last year, inflation increases in excise duties were 1.3 per cent., whereas this year they are 3.4 per cent. It is swings and roundabouts. The hon. Member for West Worcestershire referred to RPIX and the 2.5 per cent. target, but it is the all-items RPI figure that is used for revalorisation, not the figure excluding mortgage payments. That accounts for some of the difference. I do not recall any complaints from Opposition Members last year at the small inflation increases in excise duties and there should not be any about the 3.4 per cent. increase this year.

Mr. Howard Flight: Will the Minister confirm that the Government moved to using the forecast because they had two increases in fuel duty in one year? Otherwise, they could have continued with past practice of using the same inflation index for taxes and allowances.

Mr. Timms: That was not the reason. The reason was the timing of the changes. The decisions are now made at a different time of year.
In 1998, the Government published the alcohol, tobacco and fraud review that we had commissioned. It examined fraud and smuggling in some detail, particularly issues relating to alcohol. That resulted in 90 recommendations to help stem and reduce levels of illegal activity. Customs

was allocated £44 million for the period to 31 March 2002 to take forward the key recommendations. It has been acknowledged in the debate that we have implemented the main recommendations. Customs continues to work closely with the trade on those that remain.
Smuggling is a serious threat to our health and revenue objectives, but we have made it clear that we are not going to allow criminals to dictate our agenda or influence the levels of our duties. Following the 1999 Budget and the sharp rise in tobacco smuggling, my right hon. Friend the Chancellor appointed Martin Taylor to conduct an independent evaluation of tobacco smuggling last summer. His conclusions formed part of the new anti-smuggling strategy described in the Government paper, "Tackling Tobacco Smuggling", published on 22 March.

Mr. Letwin: Will the Financial Secretary now commit the Government to publishing the Taylor report?

Mr. Timms: There has been some discussion of that point during the debate. I was particularly interested in what the hon. Member for West Worcestershire said, but he was mistaken. My right hon. Friend wrote to the Chairman of the Treasury Committee on 26 January, saying:
I am afraid that the advice which Martin Taylor gave to me contained matters that were recognised to be operationally sensitive, the release of which, even in summary form, would give smugglers a valuable insight into Customs' strategy for tackling tobacco smuggling.
My hon. Friend the Member for Workington (Mr. Campbell-Savours) was right on that point. I would have thought that the Conservatives would have been aware of that letter.

Mr. Heathcoat-Amory: That is why I asked the Chancellor if he would place a copy of the report in the Library, with excisions of matters of operational sensitivity to Her Majesty's Customs and Excise. We fully understand that any matters of national importance to do with the intelligence services should be excised. The reply made no reference to that point, saying simply that Martin Taylor's advice to the Chancellor was personal and confidential.

Mr. Timms: I am glad that the right hon. Gentleman was aware of that; his hon. Friend the Member for West Worcestershire appeared not to be. The important point is that the recommendations on tackling smuggling were published in "Tackling Tobacco Smuggling" and have been fully implemented by the Government.

Mr. Letwin: Will the Minister now commit the Government to publishing the Taylor report with all operationally sensitive elements excised, and if not, why not?

Mr. Timms: My right hon. Friend's letter makes it clear why that would not be sensible. We have published the recommendations and are implementing them, as well as putting around 1,000 extra officers into tackling the problem, reversing the cuts in Customs under the previous Government. Our aim is to put cigarette smuggling into decline within three years. The additional staff dedicated to combating smuggling in the tourist lanes at the channel ports will yield important dividends in the fight against


alcohol smuggling as well, which featured particularly in the contribution of the hon. Member for Bury St. Edmunds (Mr. Ruffley).
My hon. Friend the Member for Workington rightly put great emphasis on the importance of scanners and asked me to comment on the issue, which I am pleased to be able to do. He is right about the significance of what we have done. We have committed £44 million to the purchase of a national network of scanners. There will be at least a dozen. All the main freight ports will be covered. Some of the scanners will be mobile so that we can move them to where the risk is highest. He would not expect me to say precisely where they will all be, for obvious reasons, but the first scanners will be in operation before the end of this calendar year and the remainder will be introduced during the next calendar year, so we are moving rapidly.

Mr. Heathcoat-Amory: If the scanners are going to be so quickly deployed and so successful, why does the Government's report say that the amount of smuggling will increase over the next three years?

Mr. Timms: The scale of the smuggling problem is evident. We have been open and frank about that. The right hon. Member for Bromley and Chislehurst (Mr. Forth) asked me about the scale of smuggling. The figures are in "Tackling Tobacco Smuggling". It is a characteristic of this Government that we commit ourselves only to targets that we can deliver and we only make promises that we can keep. That is why we have committed ourselves to reversing the increase in smuggling within three years. Customs is confident that it can deliver that and I have no doubt that it will.

Mr. Casale: I accept that smuggling is a threat to our health and revenue policies, but will my hon. Friend confirm that those policies are not being undermined completely by smuggling? Revenues from tobacco are going up and there is clear evidence of improvements in public health through people giving up smoking as a result of the increases. Will he further confirm that altering the price of tobacco is not the only possible anti-smuggling policy? Is it not a matter of regret that our increases in policing and controls are not supported by the Opposition?

Mr. Timms: My hon. Friend is right about the importance of tobacco duty as part of an anti-smoking policy. Interestingly, the shadow Health Secretary agrees with him on that point. During the debates on last year's Finance Bill, the Opposition tabled amendments to freeze or reduce all tobacco duties on the grounds that the rises encouraged smuggling. To listen to some speeches from Opposition Members today—including Front Benchers—one might think that that was still their policy. In fact, the policy this year is to call for some reports.
Three months after the Finance Bill debates last year, the shadow Health Secretary published a review of Conservative policy on smoking that dropped the previous Conservative opposition to the advertising ban, and reversed the Conservative party's opposition to tobacco tax increases.

The review stated, presumably, the view of all Opposition Front Benchers—that duty increases on cigarettes
send out the correct health message.
He is absolutely right.

Mr. Forth: Rubbish.

Mr. Timms: The right hon. Member says that that is rubbish, and he has put his name to a very different amendment from that tabled by his Front-Bench colleagues.
In this debate, I was expecting to congratulate Opposition Front Benchers on a sensible policy U-turn. However, the right hon. Member for Wells still had the rhetoric of last year, even though the policy substance and the amendment are different.

Mr. Flight: Will the Financial Secretary give way?

Mr. Timms: No, I have to make some headway, tempting though it is to give way to the hon. Gentleman.
I welcome the modest change proposed in the Conservative amendment, which recognises, as the shadow Health Secretary has done, that duty increases on cigarettes send out the correct health message.
A couple of days ago, I replied to one of the many letters that I receive; this one was from Wakefield health authority, and was signed by the director and deputy director of public health and the director and deputy director of the Wakefield health action zone. The letter made the straightforward point that increasing the price of tobacco through taxation leads to a reduction in consumption and, most importantly, helps to discourage young people from becoming addicted. That is the overwhelming view of those who work in health care and are concerned about these issues. That has been recognised, rightly, by the shadow Health Secretary.
On alcohol duties, there is a need to maintain the real value of Government revenue to help achieve all our objectives, such as strengthening the health service and education. Excise duty and value added tax on alcohol make a significant contribution to the Exchequer—more than £10 billion in 1998–99.
This is the first increase in the beer, wine and main cider duty rates since January 1999. It is worth making the point that alcoholic drinks are now taxed less heavily than they were at the beginning of the single market. Compared with duty rates in 1993, excise duty on beer has fallen in real terms by more than 4 per cent. The proportion of duty in relation to the cost of an on-trade pint of beer has fallen from 38 per cent. of the retail selling price in 1982 to about 30 per cent. now.
Some claim that high taxation is putting alcohol producers and pubs out of business, but that is not the case. There are lots of reasons why some businesses fail and others prosper. A significant number of breweries have reported extremely good or even record profits, such as Shepherd Neame, Young's, Belhaven, and Gales.
Abandoning the duty increases along the lines proposed by the two amendments would cost £90 million in alcohol duty and £235 million in tobacco duty. Amendment No. 8, tabled by the right hon. Member for Bromley and Chislehurst, would significantly cut tobacco duty rates, and would be particularly damaging. It ignores the vital health implications


of consequent reductions in the cost of tobacco—some 94p off the price of a typical pack of 20 cigarettes—and would cost the Exchequer £1.8 billion. Public services, including the health service, would be deprived of essential funding, and future demands on the health service would be compounded by a significant growth in the number of smokers who would require treatment.
Reference has been made to the work of the Treasury Committee in this area, and I refer hon. Members to the conclusions of its investigation into Customs and Excise, which was a worthwhile and important contribution to the debate. The Committee observed:
academic evidence does not lend weight to the argument that reducing duty rates would discourage cross-Channel trade, legitimate or otherwise to the extent that government revenue would increase.
The hon. Member for Kingston and Surbiton (Mr. Davey) rightly drew attention to that point. The Committee also noted that it did not believe that reducing duty rates
would affect large-scale smuggling which appears to be the major problem.
The Committee was right about that, and the important point was made by the hon. Member for West Worcestershire, but missed by his Front-Bench colleagues. The serious problem about cigarette smuggling is not duty-paid cigarettes from the rest of the EU being brought into the UK, but cigarettes being smuggled from outside the EU, frequently with no duty having been paid at all. A small variation in the rate of duty in the UK will not change that. That is why, as my hon. Friend the Member for Erewash (Liz Blackman) rightly said, there are serious smuggling problems in Italy and Spain, where the duty rate is much lower. It is not a problem of comparative duty rates within the EU, but of smuggling from outside the EU.
In short, the Government do not intend to produce any further reports on smuggling to the timetable that has been indicated, nor do we intend to reduce tobacco duty rates. It would be quite wrong to make that reduction. I urge the House to reject the amendments.

Mr. Letwin: Some elements of this debate have been positively surreal. We were treated to a disquisition on economics by the hon. Member for Workington (Mr. Campbell-Savours), in which he explained that changes in duty would have no effect on the propensity to smuggle. That was a unique contribution to the economics of welfare that will live in our memories.
The hon. Member for Kingston and Surbiton (Mr. Davey) referred to some academic studies. He may be right that it remains the case, as the Treasury model assumes, that, in liquor and tobacco, we have not yet reached the crossover point—the point of diminishing returns. It may be right that reductions or stasis in duties will have a commensurate, or almost commensurate, effect on revenues. The Opposition amendments raise a different matter. I declared my interest in the register, as I suppose that there are some firms with which my bank has a relationship that would be affected.
More important than that, millions of our fellow countrymen are being criminalised under present policy. The Financial Secretary is in possession of a valuable item in that connection—a serious report, commissioned with taxpayers' money from a distinguished business man who reported to the Chancellor, who is not an ordinary

individual. We have reason to believe that that report may contain important evidence and observations about the relationships—

Mr. Campbell-Savours: The hon. Gentleman is guessing.

Mr. Letwin: I am guessing, and I am doing so because a cover-up is going on. It is not in the interests of the Executive in the long run or of Parliament in the short term that such a cover-up should continue.
The Minister and his colleagues are in possession of a report that may show a clear relationship between the level of duty and the duty differential currently obtaining on the one side, and the level of smuggling, which is having a huge and—as even the Government's own report admits—growing effect on the criminalisation of very many of our fellow countrymen. That is not a matter to be laughed off or dismissed by any study, however econometrically valid or otherwise, of the relationship between duty and revenue. We are dealing with a social crisis that will not be resolved by a few scanners. The Government do not think that and they do not say that in their report, and the issue has not been resolved after repeated attempts at administrative action.

Mr. Timms: The hon. Gentleman mentioned people being criminalised. Will he confirm that people who indulge in criminal activity do so of their own will and that it is right that they should be caught and punished?

Mr. Letwin: Yes and yes, and yet this is the Government who came to power under the slogan, "Tough on crime, tough on the causes of crime." This issue is a major cause of crime in this country and there comes a moment when the problem becomes so great that the social inhibitions against criminal activity that normally restrain decent individuals in our society begin to break down. If the Financial Secretary has not noticed that happening, he is less percipient than I gave him credit for.
The Government know, and the report they commissioned made it clear—we suspect—that the main cause of the smuggling today is the duty differential. All the Opposition ask this evening is something that this Government, of all Governments, are bound to concede, being as they are so deeply devoted to the principle of freedom of information. We ask that they do not proceed with further duty increases until they bring before the House a clear and distinct report on the relationship between smuggling and duty.

Mr. Andrew Stunell: I have been following the hon. Gentleman's argument with some care. Is he saying that there comes a point when the pressure towards criminal behaviour is such that the Government have to give way? Does he believe that that applies to cannabis and the widespread breaking of the law on its consumption?

Mr. Letwin: I am amazed by the exceptional ability of the hon. Gentleman, who has been following our remarks with great care but has not been in the Chamber for almost the entire debate. I am not suggesting that the Government


should give up their attack, in this case or in others. I suggest that the Government should operate on a sensible and professional basis of sound evidence, and not conceal the evidence that they have from the House. That is a proposition so evident that I would have thought that Ministers, on reflection, will concede it.

Question put, That the amendment be made:—

The Committee divided: Ayes 113, Noes 309.

Division No. 174]
[7.33 pm



AYES


Amess, David
Lidington, David


Ancram, Rt Hon Michael
Lilley, Rt Hon Peter


Arbuthnot, Rt Hon James
Loughton, Tim


Bercow, John
Luff, Peter


Blunt, Crispin
Lyell, Rt Hon Sir Nicholas


Boswell, Tim
MacGregor, Rt Hon John


Bottomley, Peter (Worthing W)
McIntosh, Miss Anne


Bottomley, Rt Hon Mrs Virginia
MacKay, Rt Hon Andrew


Brady, Graham
Maclean, Rt Hon David


Brazier, Julian
McLoughlin, Patrick


Brooke, Rt Hon Peter
Malins, Humfrey


Browning, Mrs Angela
Mates, Michael


Bruce, Ian (S Dorset)
Mawhinney, Rt Hon Sir Brian


Cash, William
May, Mrs Theresa


Chapman, Sir Sydney (Chipping Barnet)
Moss, Malcolm



Norman, Archie


Clappison, James
Ottaway, Richard


Collins, Tim
Page, Richard


Cormack, Sir Patrick
Paice, James


Cran, James
Pickles, Eric


Curry, Rt Hon David
Portillo, Rt Hon Michael


Davies, Quentin (Grantham)
Prior, David


Davis, Rt Hon David (Haltemprice)
Randall, John


Dorrell, Rt Hon Stephen
Redwood, Rt Hon John


Duncan Smith, Iain
Robathan, Andrew


Fabricant, Michael
Robertson, Laurence


Fallon, Michael
Ross, William (E Lond'y)


Flight, Howard
Rowe, Andrew (Faversham)


Forth, Rt Hon Eric
Ruffley, David


Fowler, Rt Hon Sir Norman
Sayeed, Jonathan


Fox, Dr Liam
Shephard, Rt Hon Mrs Gillian


Gale, Roger
Simpson, Keith (Mid-Norfolk)


Garnier, Edward
Spicer, Sir Michael


Gibb, Nick
Stanley, Rt Hon Sir John


Gill, Christopher
Steen, Anthony


Gray, James
Swayne, Desmond


Green, Damian
Syms, Robert


Greenway, John
Tapsell, Sir Peter


Grieve, Dominic
Taylor, Ian (Esher & Walton)


Hague, Rt Hon William
Taylor, John M (Solihull)


Hammond, Philip
Taylor, Sir Teddy


Hawkins, Nick
Townend, John


Heald, Oliver
Tredinnick, David


Heathcoat-Amory, Rt Hon David
Trend, Michael


Hogg, Rt Hon Douglas
Tyrie, Andrew


Horam, John
Waterson, Nigel


Howarth, Gerald (Aldershot)
Whittingdale, John


Jack, Rt Hon Michael
Widdecombe, Rt Hon Miss Ann


Jackson, Robert (Wantage)
Wilkinson, John


Jenkin, Bernard
Willetts, David


Johnson Smith, Rt Hon Sir Geoffrey
Wilshire, David



Winterton, Mrs Ann (Congleton)


Key, Robert
Winterton, Nicholas (Macclesfield)


King, Rt Hon Tom (Bridgwater)
Yeo, Tim


Kirkbride, Miss Julie
Young, Rt Hon Sir George


Laing, Mrs Eleanor


Lansley, Andrew
Tellers for the Ayes:


Leigh, Edward
Mr. Geoffrey Clifton-Brown


Letwin, Oliver
and


Lewis, Dr Julian (New Forest E)
Mr. Peter Atkinson.




NOES


Abbott, Ms Diane
Davey, Valerie (Bristol W)


Adams, Mrs Irene (Paisley N)
Davidson, Ian


Ainger, Nick
Davies, Rt Hon Denzil (Llanelli)


Ainsworth, Robert (Cov'try NE)
Dawson, Hilton


Allen, Graham
Dean, Mrs Janet


Armstrong, Rt Hon Ms Hilary
Denham, John


Ashton, Joe
Dobbin, Jim


Atherton, Ms Candy
Donohoe, Brian H


Atkins, Charlotte
Doran, Frank


Austin, John
Dowd, Jim


Ballard, Jackie
Drew, David


Barnes, Harry
Dunwoody, Mrs Gwyneth


Battle, John
Eagle, Angela (Wallasey)


Bayley, Hugh
Edwards, Huw


Beard, Nigel
Ennis, Jeff


Beckett, Rt Hon Mrs Margaret
Etherington, Bill


Berth, Rt Hon A J
Fearn, Ronnie


Bell, Martin (Tatton)
Field, Rt Hon Frank


Bell, Stuart (Middlesbrough)
Fisher, Mark


Benn, Hilary (Leeds C)
Fitzsimons, Lorna


Benn, Rt Hon Tony (Chesterfield)
Flint, Caroline


Bennett, Andrew F
Flynn, Paul


Bermingham, Gerald
Foster, Rt Hon Derek


Berry, Roger
Foster, Don (Bath)


Best, Harold



Betts, Clive
Foulkes, George


Blackman, Liz
Gardiner, Barry


Blears, Ms Hazel
George, Andrew (St Ives)


Blunkett, Rt Hon David
George, Bruce (Walsall S)


Borrow, David
Gerard, Neil


Bradley, Keith (Withington)
Gibson, Dr Ian


Brand, Dr Peter
Godman, Dr Norman A


Breed, Colin
Godsiff, Roger


Brinton, Mrs Helen
Goggins, Paul


Brown, Rt Hon Nick (Newcastle E)
Golding, Mrs Llin


Brown, Russell (Dumfries)
Gordon, Mrs Eileen


Browne, Desmond
Griffiths, Jane (Reading E)


Bruce, Malcolm (Gordon)
Griffiths, Nigel (Edinburgh S)


Buck, Ms Karen
Griffiths, Win (Bridgend)


Butler, Mrs Christine
Grocott, Bruce


Campbell, Rt Hon Menzies (NE Fife)
Grogan, John



Gunnell, John


Campbell, Ronnie (Blyth V)
Hain, Peter


Campbelh-Savours, Dale
Hall, Mike (Weaver Vale)


Caplin, Ivor
Hall, Patrick (Bedford)


Casale, Roger
Hamilton, Fabian (Leeds NE)


Caton, Martin
Hancock, Mike


Chaytor, David
Hanson, David


Clapham, Michael
Heal, Mrs Sylvia


Clark, Rt Hon Dr David (S Shields)
Healey, John


Clark, Dr Lynda
Heath, David (Somerton & Frome)


(Edinburgh Pentlands)
Henderson, Doug (Newcastle N)


Clarke, Charles (Norwich S)
Henderson, Ivan (Harwich)


Clarke, Eric (Midlothian)
Hill, Keith


Clarke, Rt Hon Tom (Coatbridge)
Hinchliffe David


Clarke, Tony (Northampton S)
Hodge, Ms Margaret


Clelland, David
Hoey, Kate


Clwyd, Ann
Hood, Jimmy


Coaker, Vernon


Coffey, Ms Ann
Hoon, Rt Hon Geoffrey


Colman, Tony
Hope, Phil


Connarty, Michael
Hopkins, Kelvin


Corbett, Robin
Howells, Dr Kim


Corston, Jean
Hughes, Ms Beverley (Stretford)


Cranston, Ross
Hughes, Kevin (Doncaster N)


Crausby, David
Hughes, Simon (Southwark N)


Cryer, Mrs Ann (Keighley)
Humble, Mrs Joan


Cryer, John (Hornchurch)
Hurst, Alan


Cummings, John
Hutton, John


Cunningham, Rt Hon Dr Jack (Copeland)
Illsley, Eric



Jackson, Ms Glenda (Hampstead)


Cunningham, Jim (Cov'try S)
Johnson, Alan (Hull W & Hessle)


Dalyell, Tam
Johnson, Miss Melanie (Welwyn Hatfield)


Darting, Rt Hon Alistair


Davey, Edward (Kingston)
Jones, Rt Hon Barry (Alyn)





Jones, Helen (Warrington N)
Prentice, Gordon (Pendle)


Jones, Ms Jenny (Wolverh'ton SW)
Prosser, Gwyn



Purchase, Ken


Jones, Jon Owen (Cardiff C)
Quin, Rt Hon Ms Joyce


Jones, Dr Lynne (Selly Oak)
Quinn, Lawrie


Jones, Martyn (Clwyd S)
Radice, Rt Hon Giles


Jowell, Rt Hon Ms Tessa
Rapson, Syd


Kaufman, Rt Hon Gerald
Raynsford, Nick


Keen, Alan (Feltham & Heston)
Roche, Mrs Barbara


Kemp, Fraser
Rowlands, Ted


Khabra, Piara S
Roy, Frank


Kidney, David
Ruane, Chris


Kilfoyle, Peter
Ruddock, Joan


King, Ms Oona (Bethnal Green)
Russell, Bob (Colchester)


Ladyman, Dr Stephen
Russell, Ms Christine (Chester)


Lawrence, Mrs Jackie
Ryan, Ms Joan


Laxton, Bob
Salter, Martin


Lepper, David
Sanders, Adrian


Leslie, Christopher
Sarwar, Mohammad


Levitt, Tom
Savidge, Malcolm


Lewis, Ivan (Bury S)
Sawford, Phil


Linton, Martin
Sedgemore, Brian


Livsey, Richard
Sheerman, Barry


Lloyd, Tony (Manchester C)
Sheldon, Rt Hon Robert


Llwyd, Elfyn
Skinner, Dennis


McAvoy, Thomas
Smith, Rt Hon Andrew (Oxford E)


McCafferty, Ms Chris
Smith, Angela (Basildon)


McDonagh, Siobhain
Smith, Miss Geraldine (Morecambe & Lunesdale)


McDonnell, John


McFall, John
Smith, John (Glamorgan)


McIsaac, Shona
Smith, Llew (Blaenau Gwent)


McKenna, Mrs Rosemary
Smith, Sir Robert (W Ab'd'ns)


Mackinlay, Andrew
Snape, Peter


McNamara, Kevin
Soley, Clive


McNulty, Tony
Southworth, Ms Helen


MacShane, Denis
Spellar, John


McWalter, Tony
Squire, Ms Rachel


McWilliam, John
Starkey, Dr Phyllis


Mahon, Mrs Alice
Steinberg, Gerry


Marsden, Gordon (Blackpool S)
Stevenson, George


Marsden, Paul (Shrewsbury)
Stewart, David (Inverness E)


Maxton, John
Stewart, Ian (Eccles)


Meacher, Rt Hon Michael
Stinchcombe, Paul


Meale, Alan
Stoate, Dr Howard


Michael, Rt Hon Alun
Strang, Rt Hon Dr Gavin


Michie, Bill (Shef'ld Heeley)
Straw, Rt Hon Jack


Michie, Mrs Ray (Argyll & Bute)
Stringer, Graham


Milburn, Rt Hon Alan
Stuart, Ms Gisela


Miller, Andrew
Sutcliffe, Gerry


Mitchell, Austin
Swinney, John


Moonie, Dr Lewis
Taylor, Rt Hon Mrs Ann (Dewsbury)


Moore, Michael


Moran, Ms Margaret
Taylor, David (NW Leics)


Morgan, Ms Julie (Cardiff N)
Taylor, Matthew (Truro)


Morley, Elliot
Temple-Morris, Peter


Morris, Rt Hon Ms Estelle (B'ham Yardley)
Thomas, Gareth (Clwyd W)



Thomas, Simon (Ceredigion)


Mullin, Chris
Timms, Stephen


Murphy, Denis (Wansbeck)
Tipping, Paddy


Murphy, Rt Hon Paul (Torfaen)
Todd, Mark


Naysmith, Dr Doug
Tonge, Dr Jenny


Norris, Dan
Touhig, Don


O'Brien, Bill (Normanton)
Trickett, Jon


O'Brien, Mike (N Warks)
Truswell, Paul


Olner, Bill
Turner, Dennis (Wolverh'ton SE)


O'Neill, Martin
Turner, Dr Desmond (Kemptown)


Organ, Mrs Diana
Turner, Dr George (NW Norfolk)


Osborne, Ms Sandra
Turner, Neil (Wigan)


Palmer, Dr Nick
Tyler, Paul


Pearson, Ian
Tynan, Bill


Pickthall, Colin
Vaz, Keith


Pike, Peter L
Vis, Dr Rudi


Plaskitt, James
Walley, Ms Joan


Pond, Chris
Ward, Ms Claire


Pound, Stephen
Watts, David


Prentice, Ms Bridget (Lewisham E)
Webb, Steve




White, Brian
Winnick, David


Whitehead, Dr Alan
Wood, Mike


Wicks, Malcolm
Woodward, Shaun


Wigley, Rt Hon Dafydd
Worthington, Tony


Williams, Rt Hon Alan (Swansea W)
Wray, James



Wright, Dr Tony (Cannock)


Williams, Alan W (E Carmarthen)
Wyatt, Derek


Williams, Mrs Betty (Conwy)


Willis, Phil
Tellers for the Noes:


Wills, Michael
Mr. David Jamieson and


Wilson, Brian
Mrs. Anne McGuire.

Question accordingly negatived.

THE CHAIRMAN, being of the opinion that the principle of the clause and any matters arising thereon had been adequately discussed in the course of debate on the amendments proposed thereto, put forthwith the Question, pursuant to Standing Order No. 68, That the clause stand part of the Bill.

Question agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 12 ordered stand part of the Bill.

Clause 30

CLIMATE CHANGE LEVY

Question proposed, That the clause stand part of the Bill.

Mr. Heathcoat-Amory: In the absence of the clause having been moved, I think that I might make a few remarks about climate change, which is an important matter. It behoves the Government to explain the clause.

The Temporary Chairman (Mr. Frank Cook): Order. For the benefit of the House, I ought to clarify a point that seems to be causing some confusion. The clause does not have to be moved in the normal fashion, as the Question proposed by the Chair is that the clause stand part of the Bill.

Mr. Heathcoat-Amory: If the Government have so little confidence in the clause, I shall explain why the House should not incorporate it into the Bill. However, it would have been a courtesy to the House had the Treasury Front Bench explained why the Government wish to impose a new tax on the country. We will be interested in the Government's response in due course, but the debate would have proceeded in a more orderly manner if they had given their view of the merits of their energy tax.
Opposition Members are used to dotty new tax proposals, but the energy tax is the stupidest to date. It is a completely unnecessary new tax. The environmental objectives that it purports to deliver could be achieved far more easily by several other means.
The tax is also extremely complicated. The schedule attached to the clause is more than 80 pages long. We shall not debate that this evening, although we shall turn to it in due course in Committee Upstairs. However, I have already tried to understand it, as have the businesses that will be affected by it. The Government are still committed to their tax simplification project, but it has had no influence over the language and structure of the schedule, which describes the energy tax in detail.
That is a serious matter, as every business in the country, regardless of size, will have to try and make sense of the new tax and its provisions. The tax is unnecessary and complicated, as I have said, but it will also have a perverse effect on the industries and businesses affected by it.
I have said that all businesses, of whatever size, will pay the tax. I declare an interest here: I am a director of two companies, and we will be paying the tax. I think that those businesses will in fact be net beneficiaries of the tax, so they are in an unusual position. In that sense, I have a negative interest to declare, but for the sake of good order, I remind the House of my registered interests.
What is particularly striking about the new tax is the damage that it will do to manufacturing industry. The Labour party has long given up its traditional support for the manufacturing sector. There was a time when almost all Labour Members had at least some lingering attachment to the cause of manufacturing industry. New Labour, clearly desperate to sever itself from its past, has pretty well abandoned that mission and clearly regards support for manufacturing as something of an embarrassment. There is no other way of explaining away the succession of hammer blows that the Government have directed towards the manufacturing sector. We have already seen how diesel duty—diesel being the fuel of industry—has become the most expensive in Europe because of successive increases in duty. That has made the British haulage industry uncompetitive and raises the cost of every manufactured product that has to be physically transported.
Furthermore, we have seen a mass of regulations. It has been reported to the House before that even according to the Government's own regulatory impact assessment, the cumulative costs of regulation have totalled more than £10 billion over the course of this Parliament. I am grateful to the British Chambers of Commerce for that information. The bulk of those regulations are directed towards the manufacturing sector.
We will be debating other matters tomorrow, such as the changes to the double taxation relief. The Government pretended at the time of the Budget statement that such changes would levy an additional burden on British businesses of only £300 million. The Confederation of British Industry has given a figure today, estimating that the burden will be £750 million on only 40 member firms. The Government are in retreat on that issue. Again, such a change will damage British competitiveness and the attractiveness of this country for overseas investments.
Perhaps the most stupid proposal is the new energy tax. Rebates will be available to some firms and industries, which can negotiate a rebate of up to 80 per cent. The catch is that only some privileged sectors and businesses will be eligible for those negotiated rebates. Some 40 per cent. of the energy used in manufacturing will not be eligible for rebates. The reason is that they are confined to those businesses subject to the European Union integrated pollution prevention and control directive. That directive was designed for a completely different purpose. It covers pollution control, but the Government are using it for another purpose—to decide the level of energy tax on business and industry.
Vehicle manufacturers, for example, will not be eligible for negotiated rebates. They will have to pay the full amount. That information comes from a parliamentary briefing on the energy tax produced by the CBI in the past few days. It points out that farming, micro-electronics, packaging, industrial films and brewing industries will all have to pay the full energy tax, regardless of their energy efficiency.
A curious and rather damaging item has come to light. Each vehicle manufacturer in the United Kingdom will have to pay annually at least £1 million net in energy tax. That is a very unwelcome development because it affects Rover and its possible rescue. The Department of Trade and Industry is, in its clumsy way, now trying, along with the Prime Minister, to help the Phoenix bid for Rover, and it is talking about an emergency aid package. Meanwhile, the Treasury is planning to impose a new tax on that company of at least £1 million a year. So the new consortium is £1 million down even before it starts. That is another spectacular example of how one Department is working against the interests of another. One wonders whether they even talk to each other. It is no wonder that businesses are exasperated with the Government's pretended partnership with the business community.

Mr. Tim Loughton: Is not the point that the energy tax pays no regard to all the investment and effort that companies have made in the past in improving their energy efficiency? There was virtually nothing in the Budget about capital allowances for re-equipping by companies that gave any advantage to environmentally friendly capital investment in new equipment by companies such as car manufacturers.

Mr. Heathcoat-Amory: My hon. Friend, who knows a great deal about this, is spot on. Vehicle manufacturers in this country have already reduced carbon dioxide emissions by a quarter between 1990 and this year. My hon. Friend is absolutely right: they made great efforts to cut emissions, they are environmentally responsible, but there is no recognition of that in the design of the new tax. Not only that, they will be ineligible even for the reductions and rebates for which other industries may be eligible.

Mr. Swayne: The situation that my right hon. Friend described is all the more unwelcome for being unexpected. Those of us who have been making representations to Ministers on this question for the past 18 months were informed that there would be negotiation on rebates. Only now do we discover that those industries are not eligible for the rebates. That point has been made recently and unexpectedly.

Mr. Heathcoat-Amory: My hon. Friend is absolutely right. That is why the CBI briefing document also says about the proposals instanced by my hon. Friend:
So far, all of these proposals have been rejected with little explanation.
That is the point. It rankles with business and its representatives that these ideas are simply being dismissed without the Government even explaining why.
There are many other lunatic things about the construction of the tax. I take as an example its treatment of combined heat and power. CHP has been of great


interest to me ever since I served in the Department of Energy. It makes business and environmental sense. CHP plants that produce electricity also use the heat that would otherwise go to waste. The most familiar CHP process is that of the motor car and its heater. Every time we switch on a car heater in the winter, we experience the productive use of waste heat from an internal combustion engine.
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On a larger industrial scale, the double use of energy brings great environmental benefits. One might have thought that it would be encouraged by the new energy tax, but it is not so. The Combined Heat and Power Association, a responsible and energetic body, states:
The treatment of CHP under the Levy is causing grave concern both, among CHP developers and wider industry which seeks to utilise it…CHP has not yet been granted the fair access to this market that it was promised by Ministers.
The House might ponder on the final few words. People have been led up the garden path. They were assured by the Government that CHP would be given fair access to the market, but that is not the case.

Mr. Swinney: The right hon. Gentleman's final point has answered a question with which I was wrestling. A company in my constituency, which faces a particularly severe impact from the climate change levy, has been advised that going down the combined heat and power route would save it some costs. A briefing document from a firm of consultants says that CHP has exemptions to the levy. Does the right hon. Gentleman suspect that people have been encouraged to believe that and that that advice has been given to companies although it is not correct?

Mr. Heathcoat-Amory: I am afraid that I must draw that conclusion. Various assurances have been given in principle, including perhaps to the hon. Gentleman's constituent company. The small print reveals matters to be different. I shall give way to the Minister so that he may give us an assurance to the contrary.

Mr. Timms: The right hon. Gentleman is in danger of unintentionally misleading the House. The advice given to the firm referred to by the hon. Member for North Tayside (Mr. Swinney) is absolutely right. Combined heat and power systems will be exempted from the climate change levy. There has been a call for a wider exemption for power generated by CHP systems where it is sold from the firm that generates it to the grid. Our view is that the most generous arrangement for exemptions should apply to renewable energy sources, and that is what we propose in the levy. A firm using its own CHP will be free from the levy.

Mr. Heathcoat-Amory: That will not do. Anyone who knows anything about CHP knows that only some schemes entirely use the power on the plant site without importing or exporting some electricity. Most bigger schemes rely on fluctuations: at some stages, they import electricity from the grid, and at others, they export it to the grid. Unless that process is exempt, the entire scheme will be in danger of being uneconomic.
Let me give a specific example. British Sugar has made extensive use of CHP in the past. In fact, all nine of its factories use CHP, and have done so since the 1920s,

making the company something of a pioneer. British Sugar recognises the high energy efficiencies gained by those plants—about 80 per cent., compared with under 50 per cent. for conventional power stations. The company is anxious to renew and extend its CHP plants, but has written that
despite Government assurances that the
climate change levy
would not apply to CHP, it is now clear that it will apply to electricity sales made to licensed suppliers and subsequently sold on to business consumers.
It adds:
this application of the CCL…will make further commercial investment in large projects to install new technology CHP uneconomic.
British Sugar has therefore
decided to defer our decision to proceed with investment for replacement CHP at our York and…(Norfolk) sites for which we already have Section 36 consents. We will also defer further feasibility studies.
We deeply regret this outcome, as we firmly believe in the contribution that CHP can make to the reduction in CO2, emissions.
The trade association has described the damage that the half-baked new tax will cause, and a possible user of a new generation of CHP plants is not going ahead with two planned sites and will not undertake further feasibility studies.

Mr. Michael Jack: My right hon. Friend may be aware that the same company was encouraged in its endeavours by the Financial Secretary himself who has said that CHP can make a valuable contribution to achieving emissions reductions.

Mr. Heathcoat-Amory: My right hon. Friend is absolutely right. It is appalling that companies have heard lots of warm words telling them that the levy would treat CHP helpfully and give a green light to new schemes when that is not so. When we read the small print and examine the clauses and schedules, we find that new plants will not be economic and will not happen.
The Government are damaging an environmentally beneficial technology. They are taxing firms for using energy, but discouraging the very technologies that would enable the firms to reduce their energy consumption and avoid the tax. That is absolutely crazy. In fact, it is more than that—it is a political and economic crime.
I do not know whether the muddle over the new tax, which has lasted more than a year, is due to ignorance or arrogance. I genuinely do not know whether the Government simply do not understand what they are doing, or understand but do not care. They have been told about the difficulties by many industries. One more example is the Engineering Employers Federation, which said:
We are concerned that a sizeable proportion of EEF member companies will be substantial net 'losers' under the levy/NI rebate system. This will cause many UK engineering and manufacturing companies to become uncompetitive in international markets.
Yet the Government waffle on about the need for productivity gains and competitiveness that will conquer world markets. It is all just talk. In reality, in a succession of badly designed taxes, they are reducing competitiveness.

Mrs. Jackie Lawrence: Is the right hon. Gentleman aware of the Cambridge


Econometrics report that makes it clear that the climate change levy will benefit competitiveness in all sectors by increasing productivity with respect to energy inputs, by encouraging innovation, by improving energy management and by preparing relevant firms to exploit future markets?

Mr. Heathcoat-Amory: I am afraid that that is just not the case. Firms who are in the best position to undertake an assessment are convinced that they will be made uncompetitive in world markets. I have given the House one example of a representative body which says so.

Mr. Clapham: The right hon. Gentleman will be aware of the relationship with the new electricity trading arrangements that will come into being this autumn. There will be a change in the pool system, and the competitiveness of British industry will be stimulated because electricity will be cheaper.

Mr. Heathcoat-Amory: Actually, the change in the pool system is specifically referred to in the representations to which I have referred, but I have not gone into it because it is not part of this debate. I assure the hon. Gentleman that those changes are fully taken into account in the overall assessment made by the firms and associations that the new and unwelcome tax will damage British competitiveness, a matter that should concern the whole House.
What is particularly dotty is that the tax is not necessary on environmental grounds. There has always been an alternative route: to commit to more gas-fired electricity generation. That is another way to achieve reductions in carbon dioxide. Of course, when the tax was announced the Government were operating a moratorium; they had blocked 15 power station consents. We pointed out many times that, if they unblocked that moratorium, emissions could be reduced more efficiently and in a way that was less industrially damaging.
The Government never denied that point, but they would not budge on their energy policy until two weeks ago, when the Department of Trade and Industry issued a statement that the gas moratorium had been lifted. The 15 power stations that were refused consent can now proceed. That is a welcome U-turn, but it means that the energy tax is completely unnecessary. Even though all those 15 power stations might not be built, it is nevertheless calculated that merely a proportion of them would deliver a carbon dioxide saving equivalent to the one that the energy tax is designed to make.
It is clear that a policy mix of voluntary agreements, which were going ahead anyway, an emissions trading system, which is being designed, more combined heat and power and more gas-fired electricity generation would more than meet the required target for carbon dioxide reductions. We are committed to that internationally and the Conservative party certainly supports it.
In summary, the tax is thoroughly bad. It gives a further twist to the regulatory spiral; it damages British competitiveness and deters inward investment. It has perverse and arbitrary effects on industry; some processes, businesses and industries qualify for exemptions or rebates while others do not. Furthermore—perhaps the most spectacular point—the tax is unnecessary on environmental grounds. That is why we oppose it.

Mr. Stunell: I was rather disappointed that the Financial Secretary to the Treasury did not feel it necessary to introduce the debate on the clause. Other hon. Members can only take on trust—or as an expectation—the arguments that he will deploy when he winds up the debate.
There is no doubt that the provision is extremely important, but it has a much broader context than the Bill. Although we welcome the Chancellor's commitment to tackling the environmental problems faced by our country, we have some deep reservations about the form in which the climate change levy is presented, especially in schedules 6 and 7.
The Bill comprises 85 pages, which will make for interesting work in the Standing Committee. We shall be tabling amendments to change the overall design of the Bill, to improve its environmental effectiveness and to mitigate its impact on employment and investment.
There is a bigger picture against which the tax should be judged. Despite some of the comments of the right hon. Member for Wells (Mr. Heathcoat-Amory), we should acknowledge that the UK must respond to climate change not only as a legal but as an environmental obligation, if we are to play an active part in the world as a mature democracy.
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We must acknowledge that climate change, as it affects our country and the whole planet, is largely human-induced. It has been produced mainly by the consumption of fossil fuels and also by the loss of absorption mechanisms—deforestation has had a major impact on the planet's capacity to absorb carbon emissions. Various industrial technologies and processes have contributed to the problem.
That release of greenhouse gases is having a significant effect; it is changing the climate. Perhaps one problem is that the phrase "climate change" sounds rather neutral. In many cases, we are talking about climate degradation, not merely climate change. If we do not respond with effective policies, in this country and internationally, there will be severe consequences.
I give credit to the Government for the spirited way in which they participated in the Kyoto talks, for their willingness to enter a Europewide agreement and for the broad consultations that they have set in hand during the past two years. Although I have criticised the slowness of the process, one cannot deny that much ground has been covered. The consequences of climate change have certainly been acknowledged in the Government's thinking and, to some extent, in the climate change levy.
If there are no policy alterations in this country, in other EU countries and worldwide, we face the degradation of the planet's biodiversity, a worsening of the human condition in many parts of the world—to a considerable but, fortunately, not a major extent in this country—and economic disruption that could certainly spill over to affect this country directly.

Mr. Andrew Tyrie: I support compliance with Kyoto, but I should be grateful if the hon. Gentleman could tell me where there is any evidence that an increase in the temperature of the planet would necessarily result in a reduction of biodiversity.

Mr. Stunell: We are in danger of going wide in the debate. However, in a densely populated planet, a large


number of habitats are isolated communities. If the conditions in which those communities can exist migrated—for example, to the north—there would be no space that was not already occupied by human habitation to which the ecosystems could also migrate. That biosystem would thus be extinguished. I should be happy to provide the hon. Gentleman with more details, but you might rule me out of order, Mr. Cook.
We welcome the provision in principle, but we have some criticism of the detail. We applaud the aims of the climate change levy. As we understand them, they are primarily to reduce greenhouse gas emissions. Secondly, they would put the UK at the leading edge of conservation technology; there is a large world market to be exploited if we can achieve that. A further aim is to safeguard employment and investment in the UK—that flows from the second point. The final aim is that the levy should be revenue neutral: that is rarely sought and even more rarely achieved in taxation proposals.
Although those aims are laudable and we welcome them, the means to achieve them remain flawed. Despite the repeated fixes that have been applied to the proposal by the Departments of the Environment, Transport and the Regions and of Trade and Industry and, latterly, by the Treasury, the fact remains that the details are not satisfactory. I hope that the Liberal Democrats can play a constructive part in improving the climate change levy as it proceeds through the House.
The first of our criticisms is that the levy is on the wrong thing at the wrong point. If the levy is designed to cut greenhouse gases, especially carbon dioxide, it would be better applied upstream, where the oil, coal and gas are first burned. If the aim is to save carbon dioxide discharges in particular, it would be more sensible to apply the climate change levy to just that—not, for instance, to electricity generated from hydro power—and, to take the point made by the right hon. Member for Wells, to make adequate provision for combined heat and power to flourish.

Mr. David Drew: Would the hon. Gentleman like to add nuclear to his list?

Mr. Stunell: No, I would not.
I draw the attention of the Committee to the fact that the Government have proposed several ways in which combined heat and power can come to the market and be a significant part of the generating capacity. In fact, they have a target of 10,000 MW of installed CHP by the year 2010. The climate change levy will slow down that process. It will make it more difficult for combined heat and power projects to justify themselves in the pecking order of investment by companies that are looking at the options.
I had the opportunity to attend a seminar that was addressed by the hon. Member for Leeds, West (Mr. Battle)—who was Minister for Energy and Industry before he moved to the Foreign Office—and by the leading exponents of CHP in the industrial community. Having received their public reward and award for installing CHP, they were then asked a direct question—would they proceed to install the next phase? They said that they would not—not just because it would not save them money but because, in a world in which enterprises compete for investment, CHP did not produce as good a

return for that company as some of the other things that it could do. A move like the introduction of the climate change levy in its present form will make the possibility of investment in CHP by that company that bit more remote.
Therefore, our first criticism is that the climate change levy is a levy on the wrong thing at the wrong point. Our second criticism is that the levy is too rough and ready, when it should be smooth and progressive.
Originally, the levy was published as being designed to raise £1.8 billion. That has wisely been scaled down to about £1 billion, but Liberal Democrats believe that that could well prove to be a damagingly large abstraction of money from manufacturing at a time when it can ill afford it. In many companies, profitability—even viability—is under severe threat, and we would prefer a climate change levy to be introduced at a lower rate but with a clear built-in escalator, so that progressively tougher targets are set during the period up to 2010.
A low start-up rate will avoid the damage to companies that may occur with the abrupt introduction at the level that the Government propose. The announcement, well in advance, of a progressive escalator up to a higher value over the next 10 years will give the right signals for those who are planning investment and development within their companies, and would take account of the time frame that is needed for those investment decisions to be run in, installed and matured. We need a climate change levy that takes some account of the business cycle and of the speed of investment decision taking and installation.
Our third concern relates to the recycling mechanism. Other hon. Members may want to explore how the national insurance reduction will impact on productive industry and on the service industries. The first, on average, would be losers; the second, on average, beneficiaries.
The Minister may want to comment on the fact that the fastest growth sector in the use of energy is not manufacturing but the service sector, which, perversely, will get extra money to spend as a result of the introduction of the climate change levy although it is the most rapidly expanding and profligate user of energy.

Mr. Timms: I look forward to responding to the hon. Gentleman's arguments, but I just say to him that—contrary to what he is suggesting—the levy package will be broadly neutral between the manufacturing and service sectors and, broadly speaking, bring about no fiscal shifts.

Mr. Stunell: I shall follow, with great interest, the Minister's detailed explanation, as it might possibly justify that statement, although it is hard to credit at the moment.
I did not want to focus on the national insurance issue tonight, because those matters could be well explored in Committee Upstairs, but I wanted particularly to deal with the green recycling element of the mechanism—the £150 million that the Government are making such a song and dance about. Initially that was to be £50 million, and a great deal of noise was made about the fact that it was being trebled to £150 million.
I hope that the Minister will be prepared to acknowledge that the £150 million is "funny money". A hundred million pounds of that is simply bringing forward the investment allowances of companies in


conservation and efficiency measures. I understand that the cost to the Exchequer is anything but £100 million; it is more like £5 million.

Mr. Swinney: I want to bring forward some further information on the constituency case that I raised with the right hon. Member for Wells (Mr. Heathcoat-Amory). The investment that that company has been recommended to make to improve its energy efficiency is £1 million, so, if that is to be a claim for one company out of this supposedly £150 million fund, there will obviously be a severe impact across a range of companies that are affected by the costs of such investment.

Mr. Stunell: The hon. Gentleman makes an important point, which is perhaps about the overall size of the fund that is being made available. Leaving aside whether it is "funny money", is £150 million sufficient to trigger off the investment that is needed? I believe that experience has shown, over many years, that companies respond better to incentives to invest than they do to penalties if they do not invest, so there is every reason to consider whether £150 million is the right amount.
However, whether or not £150 million is the right size for the fund, the Government should acknowledge and understand that what they propose is not actually £150 million of recycled money but simply capital allowances with very little public expenditure impact. I suggest that it will not be a sufficient spur for companies to invest.
The right hon. Member for Wells commented on the so-called IPPC deals in the energy-intensive industrial sector. Those of us taking part in this debate are at a disadvantage, in that we have not seen the agreement that has been reached. We have heard rumours. We are told that we shall get an excellent deal—plenty of bangs for our bucks—and we are eagerly waiting to hear the outcome. However, even if the conclusion of the deals in those energy-intensive sectors means that enough money is recycled and available for those industries to achieve the efficiency improvements to which they are committed, the incentives to invest in the industries that are not included are not nearly sufficient.
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The right hon. Gentleman said that the tax is not necessary, but we do not agree. We need a levy or a carbon tax; we need a stick as well as a carrot; we need to give a clear signal to industry and to make a clear commitment internationally to fulfil our obligations.
Letting gas generation take over from coal is not a let-out. Certainly, that will reduce carbon emissions in the short term, but as the hon. Member for Stroud (Mr. Drew) indicated, in what is a short time in the energy market, nuclear generation capacity will end, and, if we replace that with gas or coal, we will increase carbon emissions. We must have in mind the future beyond 2010 when we set our policy on the climate change levy. We need a policy that allows us to do more than reach the Kyoto target by 2010. If, on 2 January 2010, when we start to confront the targets that lie beyond the Kyoto limits, we have no policies on the stocks, no research, no investment

plans being developed, no export industries and no plans for beyond 2010, this country will find that it has failed the test.
Liberal Democrat Members welcome the intentions behind the climate change levy, but we have deep concerns about much of the detail embedded in the massive schedules. We shall support the principle tonight, and fight to correct the all-important details later in the Committee proceedings.

Mr. Jack: I hope that I do not do the hon. Member for Hazel Grove (Mr. Stunell) a disservice when I say that he sounds like a man who has not had to make hard decisions in business about how to save money and keep within one's budget. I declare my business interests, which have been properly lodged in the Register of Members' Interests, in that I maintain the interests in horticulture and fresh produce which I had before I entered the House. That industry would not exist today if it had not, by virtue of the fact that energy is a key factor in its activities—certainly in the protected horticulture sector—fought year in, year out to keep down its energy costs. The industry's track record on energy saving is second to none.
The extent to which the Government have thought through the climate change levy is evident from the fact that in Budget 2000, the financial statement and Budget report, the best that we read is that the Treasury has, after many representations from the horticulture industry, produced a 50 per cent. reduction in the effect of the CCL on that industry. Only last Friday, the hon. Member for South Ribble (Mr. Borrow) and I attended a meeting with west Lancashire growers, who again made the point that all areas of the industry, including protected edible crops and the hardy ornamental sector, will be dealt another body blow if the CCL is imposed, even with the 50 per cent. reduction. At a time when there are cosy summits in Downing street between the Prime Minister and the fanning industry, it is ironic that this most vulnerable part of the agriculture sector is again being hit hardest by the Government.
Horticulture has a disproportionate influence in certain parts of the country, such as the north-west of England and the west midlands. It is interesting that in the vale of Evesham horticulture employs many people, but the cross that the west midlands is bearing at the moment is the demise of the Rover car company. The Government say that they will fight for every job in the west midlands, but they are going about it in a strange way, because at the same time that Rover's problems are occurring, they are clobbering a major user of energy—the horticulture industry. That little cameo clearly demonstrates why we should not allow the clause to stand part of the Bill. The Government should think again about their objective of meeting the Kyoto target.
I am in favour of saving energy, but I am deeply suspicious about the way in which the Government have decided to go about it. When they came to office in 1997, they were bequeathed perhaps the first working environmental tax—the landfill tax. When that was introduced by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), it was fiscally neutral and acknowledged as such. Shortly after coming to office, however, this Government started the process of creep. The landfill tax suddenly went up, but where was the parallel rebate? There was no rebate. As a former Treasury Minister, I am, perhaps, experienced enough to


know that once one has made the bridgehead, one can do much with the tax that has been established. This tax is a Trojan horse to give the Government another nice little earner.

Mr. Loughton: Is not it true that for every £1 increase in the landfill tax under this Government, not a single penny has been hypothecated back to local community environmentally friendly schemes, as was the vast majority of the tax when it was introduced by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory)?

Mr. Jack: My hon. Friend makes a powerful point that reinforces my own. We have heard nothing from the Government to indicate that they have any intention of sticking to what they say is broad fiscal neutrality for the climate change levy.
The Financial Secretary tried in an intervention to carry the Committee in an argument for the measure on the basis that, broadly, there would be neutrality. I am intrigued by the number of representations—which I shall later describe—from companies which have been mentioned in the debate by my right hon. and hon. Friends. Company after company, in manufacturing, horticulture and other industries, has pointed out the inequalities in the proposal. In their judgment, the national insurance rebate does not touch their industry. It would have been interesting to see how this distribution of national insurance rebate worked out. In the words of a famous beer advertisement, it is a rebate that seems not to be reaching a vulnerable part of the economy, which is manufacturing—hence the representations that Members have received.

Mr. Stunell: Does the right hon. Gentleman share my incredulity at the Minister's claim that there was complete neutrality within the sectors?

Mr. Jack: I am grateful to the hon. Gentleman, who underscores my point. Perhaps the Financial Secretary will enlighten us on the bland statement of justification for the fiscal impact of the tax.
I do not think that the Minister will respond to my next point, but I shall make it. Given the way that legislation is framed in government, little notes go around Whitehall inviting Departments to make their comments on proposals. I shall be grateful if the Financial Secretary will consider being candid with the House, lifting the veil a little and letting us know what exactly the Minister of Agriculture, Fisheries and Food said on behalf of the horticulture industry, and what exactly the Department of Trade and Industry said in its more candid moments about the burden on industry.
The way in which an environmental tax has been half-inched by the Treasury is remarkable. It has suddenly become the great environmental arbiter of taxation. The Department of the Environment, Transport and the Regions is no longer in that position. The Deputy Prime Minister lost that battle a long time ago. In terms of environmental legislation, the Treasury is the powerhouse. We have not been told whether the rest of government, in a more candid moment, agreed with the proposal that we are discussing.

Mr. Swayne: Over the past two years, I have had extensive correspondence with Ministers on the

disproportionate effect of tax on the protected horticulture sector. Appropriately and properly, I targeted the correspondence at the Minister of Agriculture, Fisheries and Food and the Secretary of State for the Environment, Transport and the Regions. It ended up being answered by the Financial Secretary.

Mr. Jack: My hon. Friend makes the point. I think that we are owed a candid description of what happened.
I read the "Financial Statement and Budget Report". Paragraph 6.25 on page 111 states:
The Government recognises the case for giving special treatment to energy intensive sectors because of their high energy costs and their exposure to international competition.
If ever there was a travesty of the English language, those two sentences are it.
Only today I received a letter from the British Oxygen Company stating that the full effect of the levy on it will be £8.4 million in the first year. It says that it will receive only £500,000 from the rebating of national insurance contributions, so it is £500,000 down in the highly environmentally friendly activity of gas separation. Where are we at? Who are the gainers in achieving this degree of fiscal neutrality? I see that the Financial Secretary is looking rather bored in response to that remark. It is clear that he does not have a clue how to respond to my point.
The British Oxygen Company went on to say:
We are deeply concerned about the effect on the international competitiveness of British companies as a result of these proposals.
I do not think that BOC is known as a whingeing company, but it is careful with its analysis.
There are other inconsistencies. I draw attention to a representation that I received from Calor Gas Ltd. Before doing so, however, I shall refer to paragraph 6.33 on page 112 of the "Financial Statement and Budget Report". The Government, in a moment of reckless generosity, said that they proposed to halve the rate of the levy applying to liquefied petroleum gas. If that was supposed to be earth-shattering encouragement to those involved with one of the most environmentally friendly fuels in the land, why is it that Calor Gas has written to me and other colleagues who are members of the Finance Bill Committee to point out that, despite that proposal, there is serious distortion that will encourage people away from LPG to other hydrocarbon fuels?
I shall not bore the Committee by going through all the arguments advanced by Calor Gas; perhaps that will be for another place at another time. However, it says:
The Levy means LPG users paying an extra £5m/yr for the privilege of using
a highly environmentally beneficial fuel. It is a strange tax that takes out such a fuel.
My right hon. Friend the Member for Wells was kind enough to refer to some work that I undertook to illustrate that if the gas moratorium had been lifted there would be no need for the climate change levy. As a result of an analysis prepared for me by the Library and of answers to parliamentary questions, it was shown conclusively that a reduction of 13 per cent. in energy generation by coal and an increase of 14 per cent. in the production of electricity by gas-fired power stations would achieve the initial target of a reduction of 2 million tonnes of carbon dioxide. If that is the case and more gas-fired power stations come in over and above the number required to


remove the 2 million tonnes of CO2, why have the Government not factored in that point and made substantial changes at this juncture to the climate change levy? They are in grave danger of double or treble counting the effect when my analysis suggests that there is no need for the levy.
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I refer the Financial Secretary to a further scheme that is based entirely on the Government's analysis. Again, it would do away with the necessity for the climate change levy in a wholly environmentally friendly way. It would boost the prospects of British agriculture and would be entirely environmentally friendly and CO2, neutral. How, one may already ask, is that piece of magic to be achieved? The answer appears in a publication produced by the Department of Trade and Industry, which is entitled "Wood Fuel for Electricity and Heat". From it we learn that when we burn wood, CO2 is released. However, if one then replants, that same CO2 is locked up. In other words, there is a carbon-neutral cycle.
I tabled a parliamentary question to the Minister of State, Ministry of Agriculture, Fisheries and Food, to inquire how much short rotational coppice would have to be planted to take up the full 2 million tonnes of CO2 that was the original target for the climate change levy. I received a letter in reply. I learned that 108,000 hectares would be required. That represents 0.58 per cent. of the cultivable land area in the United Kingdom. It so happens that the Treasury is funding the English rural development plan, and if we increase the hectarage from the current proposal in the plan by roughly a factor of four and spend about £120 million, we can subsidise farmers in the same way that the Government are already planning so as to produce the necessary 108,000 hectares of short rotational coppice.
I then turned to the Government's advisers to find out how much it would cost to have sufficient power stations to deal with the resulting electricity produced by that proposal. It would cost about £375 million—which is £1.5 million per megawatt of electricity produced—to burn the short rotational coppice. The Government's proposals assume that electricity producers will produce electricity from recyclable and renewable sources, so we can see that a model exists that would effectively make self-financing any additional marginal costs of the power produced in the way that I have described. The figure of 108,000 hectares, which has been confirmed by the Ministry of Agriculture, Fisheries and Food and borne out by the DTI's analysis, would be sufficient to do away with the climate change levy in a wholly environmentally friendly and beneficial way.
If I have managed to work that out, why has not the Treasury? If that scheme meant a marginal change in the cost of electricity to all users in the United Kingdom, everyone would feel that they were making their contribution to the reduction in carbon dioxide emissions. At that same time it would benefit farmers, be environmentally friendly and do away with all the complexity of the levy and the burden on manufacturing industry that it entails.
If that idea is ignored and is not investigated, that will suggest what I have thought for some time—namely, the Treasury could not give a fig about the DTI's work on

renewables: all it wants is a nice little earner. I therefore urge the Financial Secretary to investigate the proposal that I have described. It is well thought out, well researched and backed by the Government's own analysis.
Finally, I support what my right hon. Friend the Member for Wells said about combined heat and power. He spoke about the situation of British Sugar, the reduction in its investment and its fears about the proposal.
I draw to the attention of the House a representation that I received from the Brunner Mond Company, which points out that although good-quality combined heat and power will somehow be exempt from the levy, in their wisdom the Government have not defined good-quality combined heat and power. A company could invest in beneficial technology only to find that, by a quirk of the rules, it is ruled ineligible for any benefits from the CCL. I shall certainly follow up the amendment proposals in Committee.
In summary, Opposition Members have advanced sufficient well-argued points to persuade the Government to think again about whether they want the clause to stand part of the Bill. Industry would be badly affected by it, and good alternatives exist. Given the availability of environmentally friendly ways of generating electricity—through combined heat and power—the Government's proposal fails.

Mr. Swinney: There is wide acceptance in the Committee of the importance of reducing greenhouse gas emissions, in line with agreements signed at the Kyoto summit. There is also a wide understanding of the importance of global climate change and a belief that every country should play its part in addressing the problem. However, there is considerable scepticism about whether the Government's policies of crude taxation on motorists or, in the case of the climate change levy, businesses, will satisfy those objectives. They seem to be crude measures for raising revenue, rather than sophisticated methods of tackling environmental problems.
The danger that I see arising from the Government's proposals is that competitiveness will be damaged, without the environmental objectives being achieved. I shall provide more details and examples of the specific impact of the Government's proposals on companies in the locality that I represent.
The levy has been a long time coming. It was first put out for consultation in March 1998. We must ask ourselves to what extent the Government have been listening to the results of the on-going consultation exercise. Undoubtedly, changes have been made to the original proposal since the pre-Budget report first touched on the subject, and some of the extremely harsh aspects of the levy have been watered down, but not sufficiently to meet the concerns that I shall raise tonight.
The Government claim that the levy will raise £1 billion, but that will be countered by the support given to energy efficiency measures by the recycling of revenues through a reduction of employers national insurance contributions, and through the system of first year capital allowances being allocated for energy-saving instruments. The Government have made it clear that the measure will be revenue neutral. The Financial Secretary confirmed that on the record tonight. The hon. Member


for Hazel Grove (Mr. Stunell) gave a curious explanation of how the measure will be neutral, and we look forward to a more detailed explanation.
Some of the Government's comments have been contradicted by fairly substantial advisers. The firm of accountants Deloitte & Touche, whose material on the subject I have seen, states:
It cannot yet be known whether the amount raised from CCL and the amount to be handed back will be equal. Indeed it looks as though the amount to be raised will be considerably in excess, so it is not surprising that so many businesses are complaining that they will be net losers. In addition…there would be a redistribution between firms that was largely arbitrary, depending not only upon the amount and type of their energy consumption, but also on the structure of their wage bill.
That gets to the nub of some anxieties about the bluntness of the instrument that the Government propose to use.
I want to make several general points about the implications of the measure before citing some specific cases. First, let us consider competitiveness. The levy will significantly increase the energy bills of many companies and involve extra compliance costs for energy providers, thereby potentially placing them at a competitive disadvantage. Some substantial companies have been excluded from the exemptions from the climate change levy. They include glass, brick and paper manufacturers as well as the agriculture and whisky sectors. I shall say more about the latter sectors in a moment.
The measure could also undermine this country's competitiveness as a location for inward investors. The cost of energy is one of the calculations that is most closely scrutinised by inward investors when they decide on the appropriateness of individual countries as a location for their manufacturing bases.
My second general point is about red tape and bureaucracy. It is inevitable that the climate change levy will increase red tape and business costs. When the Government published their statement of intent on environmental taxation in 1997, one of the key criteria was that it
must keep dead-weight compliance costs to a minimum.
The hon. Member for Hazel Grove referred to schedules 6 and 7, which require a monumental amount of interpretation by individual companies in order to understand the full impact on their operation. When we take even a casual glance at schedules 6 and 7, the climate change levy cannot be described as a simple instrument. That will have implications for business costs.
My third general point is about environmental consequences. The Government place great emphasis on the environmental nature of the provision, but a representative of the Energy Saving Trust recently said:
Energy tax would have to be set at a politically unacceptable level in order to produce the required reduction in emissions
that the Government envisage. The Government claim some environmental benefit, but organisations that support that agenda say that the structure and the levels that the Government currently suggest will not provide the expected savings.
We should take note of the strength of opinion expressed in a report by the Select Committee on the Environment, Transport and Regional Affairs, which states:
We do not believe that the Climate Change Levy meets the tests of good taxation. The system of exemptions, negotiated agreements and reduced rates has produced an extremely complex and cumbersome market instrument which will result in a relatively modest emissions reduction.

The report also suggests that small and medium-sized enterprises will experience deep problems because the way in which the scheme is devised means that it will concentrate on larger enterprises that can make pooling arrangements to negotiate deals. We ignore that Select Committee evidence at our peril.
I shall comment on the specific implications of the measure for groups of businesses that are important to Scotland as a whole and to my constituency. The right hon. Member for Fylde (Mr. Jack) spoke about the measure's impact on the horticulture sector. Many of those who work in agriculture, such as dairy farmers and those involved in cereal production or the pig and the poultry sector, are heavy energy users. However, the agriculture sector now has relatively few employees. The beneficial impact of the reduction in employers national insurance contributions is therefore minimised because there are not many employees to compensate and benefit. The National Farmers Union has suggested a direct link between the imposition of the levy, the agricultural sector's competitiveness and further hardship. The Government should take close account of that evidence. I have mentioned the small business sector and the fact that many of the exemption agreements will exist between the Government and large energy-intensive sectors. It is difficult to understand how small businesses can gain such access.
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The third general industry to which I shall refer is the Scotch whisky sector, which has vociferously lobbied Members of Parliament who represent Scottish constituencies about the implications of the levy. The industry has referred to its energy efficiency record and its support for achieving the Kyoto targets, making substantial points about the anomalies and distortions in the Government's proposals. It has said that although distilling operations are eligible for exemption, on-site bottling may qualify only if deemed to be "technically linked". However, the Government have not defined that term and we await further clarification. I hope that the Financial Secretary will explain, and tell us when the information will be provided.
Off-site packaging operations without links to a distillery, which are common in the Scotch whisky industry, especially in relation to huge blending or bottling sites, will be ineligible for exemption from the levy. The industry estimates that that will increase its costs by approximately £400,000 per annum. It is also concerned that the Government can give no guarantee that the European Commission will give state aid clearance to the exemptions that are being discussed. This important sector is still awaiting clarification of those issues, so I hope that the Financial Secretary will say something about them tonight.
I have mentioned a successful company in my constituency, and do so again. Don and Low has invested heavily in its operations in Forfar—a successful county town in Angus—and is about to open an entirely new plant that will bring all its production under one roof. It has specifically designed that plant to be energy-efficient. However, the company is in the textiles sector, which has not been included in the industries to be exempt from the levy.
I quote a letter from the managing director of the wovens division of Don and Low. On 14 April, Mr. Stewart Baxter wrote to me to express the company's
deep concern about the Government's proposals for the climate change levy. We note that the textile industry has been excluded from the list of industries that will receive a rebate on this levy.
I enclose a report from our energy consultants which indicates that this levy will costs Don & Low an additional £197,390 per annum on our electricity.
As a company that prides itself on its energy conservation programme, we find this hard to swallow. We trade in very competitive markets mainly in Europe and are being significantly disadvantaged through the strength of the pound and the cost of transport to our key markets.
That is a triple whammy—the level of the pound, the cost of transport and the cost of the climate change levy—for one of the largest private sector organisations in my constituency.
The company's energy consultants have considered the details of the climate change levy, and I am sure that they will take another look at schedules 6 and 7 to determine whether they can elicit any further details. [Interruption.] The schedules may be impenetrable, but I am sure that that is what the consultants will try to do. Their advice is that that company will not be eligible for the energy-intensive user rebate because it does not occupy a site covered by the integrated pollution prevention and control directive, and is not a member of a negotiated agreement sector.
There is evidence that Don and Low will face difficulties as a result of the Government's proposals, and I urge Ministers to consider those details carefully. I have sent them to the Financial Secretary so that he may consider them, and the suggestion about making a full report. Such matters affect the competitiveness of some of the companies that will face the levy, and the Government ignore that evidence at their peril.

Mrs. Lawrence: I shall not speak for long, because I know that Opposition Members are anxious to make all their points and I do not want to hold them up. Having heard their comments so far, however, I conclude that they are based on one principle—an outdated principle with which the British public do not agree, and which evidence increasingly shows to be wholly wrong.
The Opposition's argument is based on the supposition that environmental protection measures cost jobs, but a company in my constituency proves the opposite by providing a wonderful example of the way in which, by adopting what could in business terms be described as "unnecessary" measures—in this instance, working for the benefit of the environment in a national park—it is possible for a company to gain a competitive advantage, and to secure its future in a highly competitive market.
When the Tories came to power in 1979, there were five oil refineries in Pembrokeshire. When they lost power in 1997, there were two. Part of the site occupied by the one in my constituency—Elf, a French refinery—is in a national park, and as a consequence the refinery has had to make extra investment. For example, I understand that storage tanks in most refineries are made of a shiny metal, because it is the cheapest material. Elf has had to employ painting techniques to make the tanks blend with the

beautiful national park on the Pembrokeshire coast, and that has involved extra cost. It has also had to consult in detail on the placement of plant, chimneys and other items, and that too has meant additional expense.
Having made the extra investment, the company maintained its forward-looking approach, and took advantage of the Government's changes in tax on ultra-low-sulphur fuel. Its investment then secured its future, at least in the medium term. Only two years ago, that future was very much in the balance. Elf provides a good example of how—contrary to what the Opposition say—investment in the environment creates jobs rather than destroying them.
According to the 1998 Cambridge Econometrics document "Industrial Benefits from Environmental Tax Reform in the UK", it is estimated that the sectors that would experience either a reduction or no change in industrial unit costs as a result of a tax of the sort proposed by the Government currently account for 91 per cent. of employment in the UK. That includes manufacturing as well as service industries, and I think that, on both counts, it is a good illustration of what I said earlier—that environmental protection will preserve jobs, not destroy them.

Mr. Jack: Can the hon. Lady explain why an industry such as horticulture, which is carbon neutral and has a marvellous record for saving energy in order to survive and to maintain jobs, should now bear the extra tax?

Mrs. Lawrence: I thought that I had finished my speech when the right hon. Gentleman intervened, but now I shall add something. My point, although general, was nevertheless pertinent. The right hon. Gentleman has clearly had his own experience in his industry, but according to my experience the rules that the Government propose to protect the environment and work towards the Kyoto targets will increase productivity, and increase the ability of British industry to improve in the future.

Mr. Christopher Gill: I preface my remarks by saying that, as someone who is interested in forestry and who has more than a passing interest in trying to ensure that there is a future for the countryside and a possibility of diversification, I hope that the Committee has listened carefully to the remarks of my right hon. Friend the Member for Fylde (Mr. Jack). He spoke a lot of good sense. Both Treasury and Agriculture Ministers would be well advised to make a further study of what he said.
It was unfair of the hon. Member for Preseli Pembrokeshire (Mrs. Lawrence) to categorise Opposition Members as believing that environmental measures all cost jobs, when my right hon. Friend made such an excellent presentation illustrating how measures could be taken to improve the environment in a cost-free manner, to the benefit of the countryside and the rural economy. Nothing that we have heard in the debate so far has done anything to convince me that the climate change levy is not a thoroughly bad tax. I suppose that it is to the hon. Lady's great credit that she has been the only Labour Member to say something in its defence.
I regret that we have not had the benefit of hearing from the Minister, who might at the beginning of the debate have explained why he feels that it is such a


thoroughly good measure, so that we could address our remarks to his points and specifically deal with them, as well as make our own points.
My right hon. Friend the Member for Wells (Mr. Heathcoat-Amory) rightly pointed out that the climate change levy is an unnecessary measure and that the tax's objectives could be achieved by other means. It will not have escaped any hon. Members who are taking part in the debate that the tax occupies no fewer than 85 pages of the Bill. It is enormously complicated. That in itself will impose burdens on industry of every description: it will have to study the measure and try to find a way through. My right hon. Friend spoke about the tax's perverse and arbitrary effects and stressed the damage to the manufacturing industry. The tax's consequences will be higher prices for the product of industry, leading to a loss of competitiveness and inevitably, sooner or later, job losses too.
At this point, it is perhaps worth pointing out that at the moment, British industry enjoys one great benefit, which I think we are all taking for granted: with sterling as strong as it is relative to other currencies, British manufacturing industry is able to import its raw materials at a relatively cheap price. In the normal course of events, that situation will not exist for ever more because currencies fluctuate—they go up and down. When our currency comes down, as inevitably it will do sooner or later—

Mr. Drew: Is the hon. Gentleman buying euros, then?

Mr. Gill: No, nor must we join the euro—[Interruption.] That would be catastrophic for the whole country.
When our currency does depreciate, industry will find that the cost of its raw materials from abroad will be higher and a lot of the competitive advantage that allows the Government to impose taxes with a degree of impunity will no longer exist. In those circumstances, industry will find that the extra taxes imposed through, for example, the climate change levy and other measures, added to the increased cost of raw materials, will make our businesses very uncompetitive.
As has already been mentioned in the debate, 40 per cent. of the energy used in manufacturing will not be eligible for rebate. I think that my right hon. Friend the Member for Wells was quite right to instance the very topical issue of the current situation—which we all know about—in the motor industry. My right hon. Friend the Member for Fylde also rightly highlighted the situation in horticulture.
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The hon. Member for North Tayside (Mr. Swinney) mentioned the situation in farming. He briefly mentioned the pig and poultry sectors, which will be very adversely affected by the integrated pollution prevention and control regulations charges. I must point out to Ministers the very real danger that the imposition of even greater overhead costs and burdens on those two agriculture industries will simply result in the export of those two industries. If that happens, the United Kingdom will be driven to import ever more pigmeat, egg and poultry products.
The hon. Member for North Tayside also correctly said that the cut in employers national insurance in the agriculture industry will be but a drop in the ocean

compared with the charges that they will have to pay. The number of people employed in agriculture has been drastically reduced, especially in the past few years. Therefore, the scope for the industry to recover a reasonable sum by a cut in employers national insurance simply does not exist.
In my constituency there is relatively little manufacturing industry. However, I do have one big employer—a most substantial manufacturer which is involved in converting aluminium. Two weeks ago, on Second Reading, I drew attention to the fact that aluminium converters will not be eligible for rebate, although aluminium smelters will be eligible. In much the same way, the hon. Member for Barnsley, Central (Mr. Illsley) was able to explain how glass manufacturers would be eligible for the rebate, whereas glass benders would not.
In the past 48 hours another example has been brought to my notice. In metal forging, there is a process in which two types of equipment—a hammer or a press—can be used. Under the IPPC, sites using the hammer-based process will be eligible for a negotiated agreement, whereas those who use presses will not, although the latter process is more efficient and is used by 70 per cent. of the industry. Those are but three examples, but they demonstrate how nonsensical the situation will be in various industries.

Mr. Loughton: Does my hon. Friend think that those nonsensical inconsistencies have anything to do with the fact that one of the United Kingdom's largest aluminium smelting plants is next to the Chancellor of the Exchequer's constituency?

Mr. Gill: That is an interesting point. However, I think that aluminium smelters would be in the category of industry that I described a moment ago as currently benefiting from relatively cheap imported raw materials. That situation will change, and the climate change levy, on top of the overheads that that industry already bears, will be the straw that breaks the camel's back. I think that my hon. Friend would confirm that aluminium smelters in other countries—I think that Iceland leads the field—have many natural advantages that do not exist in the United Kingdom. The aluminium smelters, and therefore probably the converters as well, are already in a parlous situation without the imposition of this tax.
The Government make great play of consultation. Whenever they face a difficult problem, they put it out to consultation. Talking to people, finding out their views and giving them an opportunity to be involved in the decision-making process may seem entirely reasonable, but it is all too evident in the Bill and many other aspects of the Government's work that, although an enormous amount of time and energy is spent on consultations, they are virtually disregarded when it comes to settling the Budget.
There are three clear examples in the Budget of industries that have been ignored after a consultation process: the small brewing industry, the quarrying industry and the manufacturing industry, which is the subject of this debate. There was a lot of consultation, but the Government have done nothing to meet the representations from industry.
This is a thoroughly bad tax. The basis for the eligibility for rebate is deeply flawed. It will exclude 40 per cent. of the energy used by manufacturing and will


lead to distortions between and within industrial sectors. I have illustrated that for the industries to which I have referred. For individual firms operating in highly competitive international markets, such as the aluminium converter in my constituency, whose margins have already been tightly squeezed by the value of sterling, the tax will mean increased costs and thus pressure on competitiveness and jobs. I heard what the hon. Member for Preseli Pembrokeshire said about that, but I disagree with her. If any business has its overheads increased, they eventually become unsustainable and either the business folds or it reduces its costs. The first cost to be looked at is generally the labour cost and if reductions are made, it means job losses.
The Confederation of British Industry has pointed out that before the Budget, business made constructive proposals to the Treasury for modifications that would extend eligibility for the rebate, allowing more firms to help reduce emissions by signing up to legally binding agreements, delivering real energy efficiency improvements in return for the 80 per cent. rebate. So far all those proposals have been rejected with little explanation. Business is keen to bring forward revised proposals to address the concerns that the Government might have, but cannot do so without knowing fully the reasons for rejection. That is why it is regrettable that the Minister has not yet given us the Government's reasons for the tax. The CBI also believes strongly that the Government should give priority to explaining to sectors the detailed reasons why they have rejected business proposals for extending negotiating agreement eligibility. There is more that could be said on that subject, but others wish to speak.
I conclude by saying that our proposal is the most appropriate change that could be made in the circumstances. This is a bad tax, and the only sensible thing for the Government to do is to withdraw it.

Mr. Loughton: I am a member of the Select Committee on Environmental Audit, which produced a report on the energy tax and had the interesting experience of interviewing the Financial Secretary before the Budget. I found it odd that the Financial Secretary did not open this part of the debate with some words in support of the climate change levy. It was even more odd that so few Labour Members wanted to contribute to the debate, despite the fact that the proposal takes up more than 80 pages of the Bill.
The history of the energy tax has been one of complete fudge for the last 18 months, when it first appeared on the radar screens. One of the worst examples of the fudge and muddled thinking was given by my right hon. Friend the Member for Fylde (Mr. Jack) in respect of the horticulture industry. That industry—which absorbs carbon dioxide and emits oxygen, and is one of the biggest contributors to the Kyoto targets on its own—is severely threatened. The Government have had to climb down, but only partly, in the Budget to prevent the horticulture industry from moving lock, stock and barrel to Holland, in particular, where the industry is exempt from energy tax.
Another example concerns liquid petroleum gas, and we have all received memos from Calor Gas. Again, there was only a 50 per cent. climbdown by the Government on an environmentally friendly fuel. The Government

have been entirely inconsistent with last year's Budget, in which they recognised the environmental benefits of LPG by reducing fuel duty for vehicle LPG by 29 per cent.—only to clobber LPG for non-vehicular uses with the energy tax this year.
The main point, which the Minister continues to duck, concerns competitiveness. A classic example is the effect of the tax on the British steel industry. We are at the stage where the majority of steel used in this country is imported from overseas, with a large quantity coming from countries such as Korea, South Africa and India, none of which is bound by the terms of the Kyoto protocol.
Does the Financial Secretary seriously think that, under such uncompetitive terms, British steel production will remain in Britain when it can move to anywhere in the world, including the three countries to which I have referred where there is no energy tax on steel production and the costs are much lower? Closer to home—and much worse—the industry could move to the continent; in Belgium and Luxembourg, for example, there is a 100 per cent. exemption for steel production.
In the Environmental Audit Committee, I pointed out that even after the full rebates on offer to the British steel industry, there will be a tax equivalent to £2.40 per tonne of steel produced in this country, which compares with 4p per tonne in Germany and an average for Europe as a whole of 40p per tonne. When I pointed out that that might just impact on the competitiveness of the British steel industry, the Financial Secretary said that he imagined that the industry was pleased with the much more favourable position in which it finds itself. That was woefully inadequate.
Some 72 per cent. of car components used in new cars in the UK are now imported from overseas—a major component being steel. That is an increase of more than 10 per cent. over the last three years. Despite all the good work done in reducing fuel consumption by the British steel industry over a number of years and despite signing a memorandum of understanding with the Department of the Environment, Transport and the Regions on energy savings in December 1999, the British steel industry will be caned heavily.
The Financial Secretary pretends that countries such as Korea, South Africa and India—which would benefit from the production of steel moving abroad—can exist in some sort of environmental dome; that the carbon dioxide emissions that they produce in a much less regulated system than that of this country can be contained within their own airspace. That is a complete nonsense, of course, and if the Government are serious about global environmental improvement, they need to take account of the competitive advantage they will give to less environmentally friendly countries on the other side of the planet.

Mr. Timms: I am slightly concerned by the hon. Gentleman's line of argument. Does he believe that the UK should meet its Kyoto targets?

Mr. Loughton: I agree entirely that this country should meet its Kyoto targets, if not the extended target as well. Those targets could be met by a raft of other measures that have already been put in place, many by the previous


Government. It could have been met even faster if we had not had the moratorium on gas-fired power stations that the Government introduced two years ago for no other reason than pandering to the coal mining lobby, regardless of the environmental impact. They were trying to have their cake and eat it.
The other inconsistency in the Government's approach has been the use of the IPPC criteria for those companies that will be exempt. We are the only country in the EU which uses those criteria for determining who will be subject to an energy tax. It will be the non-polluting businesses which stand to suffer the most. I fail to see, despite the Minister's constant protestations, how the measure can be a sector-neutral tax. The same sectors will experience great divergences.
One sector that will not be exempt is glass, but a major part of the glass industry produces double glazing, which has a great environmental benefit. It will still be 100 per cent. liable for the energy tax. Some two thirds of the energy bill of a supermarket chain such as Sainsbury's goes on chiller cabinets for chilled and frozen foods. That cannot be reduced by new technology. The textile industry in the east midlands has lost half its work force in the past 10 years and Coats Viyella has just announced the closure of another factory with the loss of 200 jobs. That industry will not benefit from the exemptions to the tax.
BOC has already been mentioned, and it is one of the largest employers in my constituency. Some 78 per cent. of the cost of the industry is electricity, and it is one of the five largest users of electricity in the UK. It stands to lose £8.5 million through the energy tax charges, and will gain only £500,000 through the national insurance changes. What will happen to BOC, a company in the throes of a takeover by a European and American consortium? As the company itself has pointed out, it will be able easily to remove production of those gases to alternative countries or to increase the prices to the consumer, both of which will have knock-on effects on British manufacturing industry, including the steel and chemical industries, supermarkets and retailers who use its products. That is despite the fact that BOC has voluntarily improved its energy efficiency by some 13 per cent. over the past five years.
So much of the detail of this new and harmful tax is still shrouded in secrecy. We have not seen the terms of the agreements. We have not seen how it can be sector neutral. We do not know how long the rebate will last after the initial few years. How will the second wave of companies to be exempt be decided? We have had no details of how the emissions permit trading system will operate. We have no further details—which were promised by the Minister when he appeared before the Environmental Audit Committee—on other possible criteria for exemption instead of the IPPC criteria. We also have no details about how the negotiated agreements will be monitored.
The entire tax has been a fudge, a mess and a muddle for the past 18 months. The Government still do not know what they are doing, and the details in the Finance Bill are a triumph of quantity over quality. A red herring of green taxation is being used as an excuse for another revenue-raising power, which will destroy the competitiveness of so much of British industry, for which the Budget has done little indeed.

Mr. Swayne: My hon. Friend the Member for Ludlow (Mr. Gill) spoke about how the effect of the tax might be

masked for a while by the competitive exchange rate enjoyed by companies that import a disproportionate amount of the raw products that they need. However, that will not be true of the protected horticulture sector, which will be exposed to the full force of this disastrous tax from the outset.
I have raised the problems faced by the protected horticulture sector in questions, correspondence and debate for the past two years. Recently, my correspondence has focused on the industry's attempts to secure the 80 per cent. rebate that was to be available on detailed issues to do with the progress of negotiations, and on how agreements could be enforced technically.
After all that correspondence, and all the words written to me by the Financial Secretary, we now discover that the protected horticulture industry is not eligible for any rebate because it is not covered by the European Union's IPPC directive. When he winds up the debate, I hope that the Financial Secretary will explain how that confusion, which has caused so much fruitless correspondence, arose.
As it applies to the protected horticulture sector, this is a daft tax. As my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) said, the horticulture sector consumes carbon dioxide, and is therefore an environmentally friendly industry. However, it is highly exposed to competitive pressure from the rest of Europe, and from Holland in particular.
The consequence of the industry's destruction would be that this country would have to import produce from elsewhere. Those imports, to a very great extent, would arrive by air and thus use aviation fuel—one of the worst forms of pollution, and one of the worst generators of greenhouse gases. That would be a ridiculous situation for this country.
The Government acknowledge that competition abroad provides a generous regime for energy taxes, and have therefore agreed a temporary 50 per cent. rebate for protected horticulture. I have never believed that a rebate of 50 per cent. would be enough—from the start, I have argued that the rebate should be of 100 per cent—but why is it to be temporary? Why is a sunset clause to be built into the proposal to ensure that, as an absolute maximum, the rebate will last for only five years? Is it because the Government recognise that no protected horticulture industry will exist in five years? Is that why they consider that the arrangement can be discarded then?

Mr. Tyrie: I shall be brief, as time is getting on. This proposed tax is extraordinary. I have seen nothing like it since the poll tax first appeared in the mid-1980s. [Interruption.] When I first saw the details of it, in 1985, the poll tax was called the residents' charge, and I fought a bitter—and, I am afraid, fruitless—battle against it. Some Labour Members laugh now, but they will wring their hands. I hope that they will do their best to fight this extraordinary levy when they start receiving complaints from manufacturing firms in their constituencies.
I am not even sure that this is a tax. A tax, according to any definition of taxation, needs a degree of certainty, but there is no certainty built into this. The levy will be negotiated individually with firms. There is no precedent for a measure with so much uncertainty built in. I even wonder—and perhaps this would better be made as a point of order—whether it would qualify as a money Bill. The House of Lords might like to consider that at a later stage, if it has not been completely neutered by further reform.
The main objections to the tax have already been raised. It will not target the people who produce the CO2 emissions—if, indeed, the objective is to cut down CO2 emissions. Gas generation should be encouraged and coal-fired generation of electricity discouraged. The levy will not achieve that. To believe that a tax can be devised that is not only neutral overall but neutral with respect to manufacturing stretches credulity. I cannot believe that that is achievable. Officials must have been working overtime to think of a way of squaring that circle so that the Minister could say what he said a moment ago.
For the tax to have the intended effect, there must be a massive restructuring of British industry. I do not believe that the Government have the stomach for that, but I believe that they have the stomach for tax increases. A measure cloaked in an environmental guise will turn into a revenue-raising measure that will have little, if anything, to do with Kyoto.
The heart of the case is built around some of the points made by my hon. Friend the Member for East Worthing and Shoreham (Mr. Loughton) and my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory). The medium-term effect of the tax must be that a significant proportion of British industry will go abroad to places not covered by the Kyoto agreement. Its net effect may be to increase global emissions of CO2 overall. If the Government have not even estimated what the net reduction in global CO2 emissions would be as a consequence—and I have seen nothing on the Government's capacity to fulfil the Kyoto agreement—they should withdraw the measure.

Mr. Drew: I am confused about how removing the climate change levy will convince countries that have not yet signed up to Kyoto to do so.

Mr. Tyrie: I find it ludicrous that we should embark on a massive restructuring of British industry, with a possible huge economic disbenefit to many people in Britain, merely in the hope that other countries will finally sign up to Kyoto. If we are to reduce CO2 emissions globally, we must act globally. We must move forward with the main producers on board. The main producers of CO2 emissions are not on board: the United States will drag its feet, and China has given no indication that it is prepared to implement the Kyoto agreement.
This is an extraordinary, ill-thought-out tax, and I sincerely hope that before it is too late, the Government will rethink the measure and get rid of the 83 pages of schedule 6.

Mr. Timms: There was some procedural confusion among Opposition Members at the outset of the debate. We have not been debating an amendment—this is a clause stand part debate, which I am responding to in the normal way.
In opening the debate, the right hon. Member for Wells (Mr. Heathcoat-Amory) made a series of wild and uncharacteristically ill-informed generalisations criticising the climate change levy. He made several inaccurate comments, and I look forward to putting them right in Committee.
9.45 pm
Having made some wild generalisations, the right hon. Gentleman fastened on a couple of specific complaints, but no amendments have been tabled on combined heat and power, the integrated pollution prevention and control basis for negotiated agreements or any of his points. That is why I found his speech confusing. The hon. Member for Hazel Grove (Mr. Stunell) rightly said that the right hon. Gentleman did not refer to the seriousness of the problem of climate change, and nor did he refer to the Kyoto objectives, which we have a statutory obligation to meet. By those omissions, he reflected the Tory party's dreadful record on the environment.
The hon. Gentleman was right to acknowledge those points and to support the principle of introducing the levy, which should be supported by everyone concerned about climate change and global warming. The levy is strongly supported by environmental organisations, and there has been a steady and encouraging stream of letters from constituents to Members of Parliament saying that the Government must stick to their guns on the climate change levy. That is what we shall do.

Mr. Tyrie: Will the Minister give way?

Mr. Timms: I will not give way at this stage.
Climate change is the single greatest environmental threat facing the world today. Globally, average temperatures are rising by about 0.15 deg C per decade, and 1998 was the warmest year on record. The intergovernmental panel on climate change predicts that if no action is taken to limit greenhouse gases, global average temperatures could rise by up to 3.5 deg C by the end of the next century. That would cause extreme changes in weather patterns, rising sea levels, damage to agriculture and population displacement with potentially catastrophic effects in some parts of the world.

Mr. Swayne: Will the Minister give way?

Mr. Timms: I should like first to make some progress.
At the Kyoto Summit in 1997, the developed countries agreed a legally binding commitment to reduce greenhouse gas emissions. The UK's contribution was set at a 12.5 per cent. reduction in emissions on 1990 levels. Following that agreement, in March 1998 my right hon. Friend the Chancellor asked Lord Marshall—then president of the Confederation of British Industry—to produce a report on economic instruments and the business use of energy. His report was published in November 1998 and said that there
probably is a role for a tax if businesses of all sizes and from all sectors are to contribute to improved energy efficiency and help meet the UK's emissions targets.
In the light of that report and further consultations, the Chancellor announced in the March 1999 Budget that we would introduce a climate change levy on business use of energy, to take effect from April 2001. The levy forms a key part of our climate change programme and our drive towards environmental modernisation. It will make a significant contribution to meeting our legally binding Kyoto target and, moving beyond that, towards our domestic aim of a 20 per cent. reduction in CO2 emissions. I was pleased to hear the hon. Member for East Worthing and Shoreham (Mr. Loughton) support that, even if I disagreed with much of the rest of his speech.
Revenues from the levy will be recycled to business through cuts in employer national insurance contributions and additional support to promote energy efficiency, including renewable sources of energy.

Mr. Tyrie: Would the Minister substantiate the point that he made early in his remarks that the recycling of the money—implying fiscal neutrality—would be achieved within the manufacturing sector? How can that be ensured?

Mr. Timms: It has been ensured. It was set out in the pre-Budget Report last November. I am surprised that more hon. Members were not aware of that. However, I shall address that point as several Members have referred to the matter.
We made it clear that the climate change levy will be charged on the industrial and commercial use of energy. It is aimed at maximum environmental effectiveness while safeguarding the competitiveness of UK firms. We also wanted to make it as simple as possible to administer and, thanks to extensive consultation, we have achieved that. The tax is well designed as a result both of the wide discussions that have taken place since the Chancellor's announcement a year ago and of the changes that we made subsequently.
For social policy reasons, the levy will not be charged on the domestic use of energy, because of our concern at the current high rate of fuel poverty. The existing rules used to establish which supplies of fuel and power are charged at the lower rate of 5 per cent. value added tax will be used to determine domestic consumption. As a consequence, the non-business use of energy by charities will also not be subject to the levy.

Mr. Swinney: Will the Minister clarify whether local authorities, as public sector bodies, will be liable to pay the climate change levy?

Mr. Timms: Yes, they will. They will also benefit substantially from the reduction in national insurance contributions. For that reason, the package is an attractive one for many local authorities.
Several hon. Members referred to combined heat and power. As I pointed out in an intervention, the exemption from the levy for combined heat and power will create a favourable environment for the development of such systems. I anticipate that many firms—to some of which I have spoken—will invest in CHP as a result.
I am aware of the case of British Sugar, which intends to defer decisions on a couple of CHP systems because it would prefer an even more favourable environment. However, it is right that the most favourable regime under the levy should be for renewable energy sources; renewable energy is much less well established in the UK and, critically, it produces zero emissions, whereas there are emissions from CHP.
However, the levy will provide a significant boost for good-quality CHP systems. We shall certainly see many new schemes of that sort as a result.

Mr. Stunell: Is the Minister assuring the Committee that the introduction of the levy in its current form will accelerate the achievement of the 10,000 MW target for CHP by 2010, or slow it down?

Mr. Timms: The levy will provide a significant additional boost for investment in CHP—I think that is the point that the hon. Gentleman was making. It is good news for CHP.

The hon. Gentleman also suggested that some funny money was involved in the package of support for energy efficiency measures. That is not true. The 100 per cent. capital allowances are certainly not funny money; they will cost the Exchequer £100 million in year one and rather more in year two. Of course, the real incentive for extra investment and for extra effort to save energy is provided by the levy itself. It will increase the incentives for people to reduce energy usage. I can assure him that there is a genuine and substantial Exchequer cost in the capital allowance part of the energy efficiency fund as well as in the £50 million to which he also referred.

Mr. Loughton: The Minister told the Select Committee on Environmental Audit that the £100 million was purely capital allowances that are now available in year one rather than later, so the actual amount of tax that companies will pay is no less—the matter relates only to the timing of the payment of the tax.

Mr. Timms: I made the point that in year one there is a £100 million cost to the Exchequer as a result of that package of allowances. Of course, as the hon. Gentleman will know, capital allowances are extremely popular among firms and undoubtedly have a significant effect in encouraging investment of that kind.

Mr. Stunell: rose—

Mr. Timms: I will not give way for a moment. I want to make some more headway.
The right hon. Member for Fylde (Mr. Jack), in his customarily well-informed, engaging way, made a point about the strict consents policy that I have heard him make a couple of times now. The lifting of the strict consents policy has already been announced. It was only ever intended to be a temporary policy—that was always made absolutely clear—and the three years of its application will not have a measurable impact on emissions by 2010. Therefore I hope that we can dispose of that argument, ingenious although it is.
The right hon. Gentleman made the slightly idiosyncratic suggestion that we should put all our eggs in one basket, the basket in question being short-rotation coppicing. I believe that there is a role for short-rotation coppicing. I have visited the first power station to make use of such coppicing; it is being developed by Kelda in the constituency of my hon. Friend the Member for Selby (Mr. Grogan). I do not know whether the right hon. Gentleman has been there; I recommend him to go if he has not been. It is an interesting visit. There are some issues surrounding the cost of producing energy in that way, but I believe that there is a role for it, alongside other renewable power generation methods. The levy will help; that perfectly illustrates its importance. The levy is precisely the type of measure that is needed to stimulate new and renewable energy generation methods, because they are completely exempted from the levy whereas conventional methods are not. That will provide an incentive effect.
However, the right hon. Gentleman seemed to suggest that there was some easy, obvious, painless solution, which no one would ever notice, to address the problem of emissions in the United Kingdom. There is not. That is illusory, and I do not think that that view should be expressed.
My hon. Friend the Member for Preseli Pembrokeshire (Mrs. Lawrence) made some important points about the commercial opportunities for the UK in the development of these new techniques, and in environmental modernisation. She is absolutely right about that.
The right hon. Member for Fylde asked me about the Treasury's work with other Government Departments. Unlike the Government he was a member of, ours is a joined-up Government, and that is certainly the case in this area, as in every other.
Several hon. Members asked me to go into more detail—in fact, the hon. Member for Chichester (Mr. Tyrie) just asked me to do so—about revenue neutrality. All the proceeds of the levy will be recycled to business, but beyond that, the levy will indeed be broadly neutral between the manufacturing and services sectors. That means that the impact of the combination of payments under the levy, the reduction in employer's national insurance contributions and the additional support for energy-saving measures in the £150 million fund on the manufacturing sector or on the services sector will broadly balance each other out. That was spelt out in the pre-Budget report in November. Very many firms will be net beneficiaries from the package. I was pleased that the right hon. Member for Wells said that he was a director of two of them.
Of course, the effect of a levy such as this, which is revenue neutral overall but shifts the burden on an unchanged overall sum in tax from employment to energy use, will be a further boost for employment in the UK. That is another reason why the levy is such good news.
Finally, I want to respond to the points that the hon. Member for New Forest, West (Mr. Swayne) and others made on horticulture. The Bill would provide the horticulture sector with a uniquely favourable arrangement. Opposition Members should have welcomed that. It is a significant change on what was said in November. I did not notice much of a welcome. It is a very favourable step from the viewpoint of the horticulture sector. There will be a ring-fenced fund, within the wide range of the efficiency package, to help energy-efficient investments in horticulture. Thermal screens will be eligible for help from the fund. Finally, the levy will be set at the 50 per cent. rate for up to five years.
10 pm
By the time the levy comes into effect next year, it will have been two years since it was announced, and longer still since Lord Marshall's report. That long period of preparation was adopted to ensure that we could get the details right and to enable everybody involved to prepare adequately for the change. That has been achieved. It has been an impressive exercise, and I thank everyone who took part. I know that some would have liked more change, and I do not blame anyone for continuing to lobby for lower tax bills, which is everyone's prerogative. The great majority of the concerns that were expressed have now been wholly addressed and substantial changes have been made in response to the consultation. I commend this important clause to the Committee.

Mr. Flight: We do not object to the Kyoto targets or our obligations, but as my hon. Friend the Member for

East Worthing and Shoreham (Mr. Loughton) has pointed out, the clause has a history of fudge, muddle and pork-barrel politics. This is a crackpot proposal. Its impact will be unfair and arbitrary. The 1PPC guidelines are not suitable, and the Kyoto objectives can be achieved by other means such as increased use of gas power and coppicing. It is nonsense not to exempt all combined heat and power processes, as almost all have to sell electricity to the grid and buy it back. As the hon. Member for Hazel Grove (Mr. Stunell) pointed out, the subject of the levy is wrong, and it should be targeted upstream on CO2 emissions.
Conservative Members do not believe that the levy will be tax neutral. As hon. Members have pointed out, it is inevitable that it will become a nice little earner.
BOC has been cited as an example of a sound, environmentally friendly British company that will suffer, and indeed it will. Its bill, net of its rebate, will be just under £8 million. It spends £60 million per annum, or 78 per cent, of its production costs, on electricity. Its air separation process is environmentally friendly, and it has spent a considerable amount on environmentally friendly investment in this country. It will be placed at a major competitive disadvantage to businesses in the Netherlands and Germany, where industrial gases companies are exempt from such taxes.
The clause will cause enormous damage to British manufacturing, including the steel industry. We are grateful for the sop that has been thrown to horticulture, but I assure the Minister that present exchange rates mean that the substantial horticulture industry in my part of the world believes that it will not exist in a year and a half if the clause is passed.
In the motor car industry, the Government are giving to Rover with one hand, and imposing a £1 million tax with the other. As the hon. Member for Preseli Pembrokeshire (Mrs. Lawrence) pointed out, environmental change produces jobs, but they will be nothing compared with the jobs that will be lost in British industry and engineering and in the heartland of Labour constituencies. The clause is absolutely typical of elitist, politically correct new Labour. The Minister calls it good news. He should tell that to British industry. This will be a disaster for British industry.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 309, Noes 122.

Division No. 175]
[10.4 pm



AYES


Abbott, Ms Diane
Benn, Rt Hon Tony (Chesterfield)


Adams, Mrs Irene (Paisley N)
Bennett, Andrew F


Ainger, Nick
Bermingham, Gerald


Ainsworth, Robert (Cov'try NE)
Berry, Roger


Allen, Graham
Best, Harold


Anderson, Janet (Rossendale)
Betts, Clive


Armstrong, Rt Hon Ms Hilary
Blackman, Liz


Ashton, Joe
Blears, Ms Hazel


Atherton, Ms Candy
Boateng, Rt Hon Paul


Atkins, Charlotte
Borrow, David


Austin, John
Bradley, Keith (Withington)


Ballard, Jackie


Barnes, Harry
Brinton, Mrs Helen


Bayley, Hugh
Brown, Rt Hon Nick (Newcastle E)


Beard, Nigel
Brown, Russell (Dumfries)


Beckett, Rt Hon Mrs Margaret
Browne, Desmond


Beith, Rt Hon A J
Bruce, Malcolm (Gordon)


Bell, Stuart (Middlesbrough)
Burstow, Paul


Benn, Hilary (Leeds C)
Butler, Mrs Christine





Campbell, Rt Hon Menzies (NE Fife)
Hall, Patrick (Bedford)



Hamilton, Fabian (Leeds NE)


Campbell, Ronnie (Blyth V)
Hanson, David


Campbell-Savours, Dale
Harman, Rt Hon Ms Harriet


Caplin, Ivor
Heal, Mrs Sylvia


Casale, Roger
Healey, John


Caton, Martin
Heath, David (Somerton & Frome)


Chaytor, David
Henderson, Doug (Newcastle N)


Clapham, Michael
Henderson, Ivan (Harwich)


Clark, Rt Hon Dr David (S Shields)
Heppell, John


Clark, Dr Lynda (Edinburgh Pentlands)
Hill, Keith



Hinchliffe, David


Clarke, Charles (Norwich S)
Hodge, Ms Margaret


Clarke, Eric (Midlothian)
Hoey, Kate


Clarke, Rt Hon Tom (Coatbridge)
Hood, Jimmy


Clarke, Tony (Northampton S)
Hoon, Rt Hon Geoffrey


Clelland, David
Hope, Phil


Clwyd, Ann
Hopkins, Kelvin


Coaker, Vernon
Howells, Dr Kim


Coffey, Ms Ann
Hughes, Ms Beverley (Stretford)


Colman, Tony
Hughes, Kevin (Doncaster N)


Connarty, Michael
Hughes, Simon (Southwark N)


Corbett, Robin
Humble, Mrs Joan


Corbyn, Jeremy
Hurst, Alan


Corston, Jean
Hutton, John


Cox, Tom
Iddon, Dr Brian


Cranston, Ross
Illsley, Eric


Crausby, David
Jackson, Ms Glenda (Hampstead)


Cryer, Mrs Ann (Keighley)
Jackson, Helen (Hillsborough)


Cryer, John (Hornchurch)
Jamieson, David


Cummings, John
Johnson, Alan (Hull W & Hessle)


Cunningham, Rt Hon Dr Jack (Copeland)
Johnson, Miss Melanie (Welwyn Hatfield)


Cunningham, Jim (Cov'try S)
Jones, Rt Hon Barry (Alyn)


Dalyell, Tam
Jones, Helen (Warrington N)


Darling, Rt Hon Alistair
Jones, Ms Jenny


Davey, Edward (Kingston)
(Wolverh'ton SW)


Davey, Valerie (Bristol W)
Jones, Jon Owen (Cardiff C)


Davidson, Ian
Jones, Dr Lynne (Selly Oak)


Davies, Rt Hon Denzil (Llanelli)
Jones, Martyn (Clwyd S)


Dawson, Hilton
Jowell, Rt Hon Ms Tessa


Dean, Mrs Janet
Kaufman, Rt Hon Gerald


Denham, John
Keen, Alan (Feltham & Heston)


Dobbin, Jim
Kemp, Fraser


Donohoe, Brian H
Khabra, Piara S


Doran, Frank
Kidney, David


Drew, David
Kilfoyle, Peter


Dunwoody, Mrs Gwyneth
King, Ms Oona (Bethnal Green)


Eagle, Angela (Wallasey)
Kirkwood, Archy


Edwards, Huw
Ladyman, Dr Stephen


Ennis, Jeff
Lawrence, Mrs Jackie


Etherington, Bill
Laxton, Bob


Fearn, Ronnie
Lepper, David


Field, Rt Hon Frank
Leslie, Christopher


Fisher, Mark
Levitt, Tom


Fitzsimons, Lorna
Lewis, Ivan (Bury S)


Flint, Caroline
Linton, Martin


Flynn, Paul
Livsey, Richard


Foster, Rt Hon Derek
Lloyd, Tony (Manchester C)


Foster, Don (Bath)
McAvoy, Thomas


Foulkes, George
McCafferty, Ms Chris


Gardiner, Barry
McDonagh, Siobhain


George, Andrew (St Ives)
Macdonald, Calum


George, Bruce (Walsall S)
McDonnell, John


Gerrard, Neil
McFall, John


Gibson, Dr Ian
McGuire, Mrs Anne


Godman, Dr Norman A
McIsaac, Shona


Godsiff, Roger
McKenna, Mrs Rosemary


Goggins, Paul
Mackinlay, Andrew


Golding, Mrs Llin
McNamara, Kevin


Gordon, Mrs Eileen
McNulty, Tony


Griffiths, Win (Bridgend)
MacShane, Denis


Grocott, Bruce
McWalter, Tony


Grogan, John
McWilliam, John


Gunnell, John
Mahon, Mrs Alice


Hain, Peter
Marsden, Gordon (Blackpool S)




Marsden, Paul (Shrewsbury)
Smith, Miss Geraldine (Morecambe & Lunesdale)


Maxton, John


Meacher, Rt Hon Michael
Smith, John (Glamorgan)


Meale, Alan
Smith, Llew (Blaenau Gwent)


Michael, Rt Hon Alun
Smith, Sir Robert (W Ab'd'ns)


Michie, Bill (Shef'ld Heeley)
Snape, Peter


Michie, Mrs Ray (Argyll & Bute)
Soley, Clive


Miller, Andrew
Southworth, Ms Helen


Mitchell, Austin
Spellar, John


Moonie, Dr Lewis
Squire, Ms Rachel


Moore, Michael
Starkey, Dr Phyllis


Moran, Ms Margaret
Steinberg, Gerry


Morgan, Ms Julie (Cardiff N)
Stevenson, George


Morley, Elliot
Stewart, David (Inverness E)


Morris, Rt Hon Ms Estelle (B'ham Yardley)
Stewart, Ian (Eccles)



Stinchcombe, Paul


Mullin, Chris
Stoate, Dr Howard


Murphy, Denis (Wansbeck)
Strang, Rt Hon Dr Gavin


Murphy, Rt Hon Paul (Torfaen)
Straw, Rt Hon Jack


Naysmith, Dr Doug
Stringer, Graham


Norris, Dan
Stuart, Ms Gisela


O'Brien, Bill (Normanton)
Stunell, Andrew


O'Brien, Mike (N Warks)
Sutcliffe, Gerry


O'Hara, Eddie
Taylor, Rt Hon Mrs Ann (Dewsbury)


Olner, Bill


O'Neill, Martin
Taylor, David (NW Leics)


Organ, Mrs Diana
Taylor, Matthew (Truro)


Osborne, Ms Sandra
Temple-Morris, Peter


Palmer, Dr Nick
Thomas, Gareth (Clwyd W)


Pearson, Ian
Timms, Stephen


Pickthall, Colin
Tipping, Paddy


Pike, Peter L
Todd, Mark


Plaskitt, James
Tonge, Dr Jenny


Pond, Chris
Touhig, Don


Pound, Stephen
Trickett, Jon


Prentice, Ms Bridget (Lewisham E)
Truswell, Paul


Prentice, Gordon (Pendle)
Turner, Dennis (Wolverh'ton SE)


Prescott, Rt Hon John
Turner, Dr Desmond (Kemptown)


Prosser, Gwyn
Turner, Dr George (NW Norfolk)


Purchase, Ken
Turner, Neil (Wigan)


Quin, Rt Hon Ms Joyce
Tyler, Paul


Quinn, Lawrie
Tynan, Paul


Radice, Rt Hon Giles
Vis, Dr Rudi


Rapson, Syd
Walley, Ms Joan



Ward, Ms Claire


Raynsford, Nick
Watts, David


Rendel, David
Webb, Steve


Roche, Mrs Barbara
White, Brian


Rooker, Rt Hon Jeff
Whitehead, Dr Alan


Ross, Ernie (Dundee W)
Wicks, Malcolm


Rowlands, Ted
Williams, Rt Hon Alan (Swansea W)


Roy, Frank


Ruane, Chris
Williams, Alan W (E Carmarthen)


Ruddock, Joan
Williams, Mrs Betty (Conwy)


Russell, Bob (Colchester)
Willis, Phil


Russell, Ms Christine (Chester)
Wills, Michael


Ryan, Ms Joan
Wilson, Brian


Salter, Martin
Winnick, David


Sanders, Adrian
Wood, Mike


Sarwar, Mohammad
Worthington, Tony


Savidge, Malcolm
Wray, James


Sawford, Phil
Wright, Dr Tony (Cannock)


Sedgemore, Brian
Wyatt, Derek


Sheerman, Barry


Skinner, Dennis
Tellers for the Ayes:


Smith, Rt Hon Andrew (Oxford E)
Mr. Jim Dowd and


Smith, Angela (Basildon)
Mr. Mike Hall.



NOES


Amess, David
Bottomley, Peter (Worthing W)


Ancram, Rt Hon Michael
Bottomley, Rt Hon Mrs Virginia


Arbuthnot, Rt Hon James
Brady, Graham


Bell, Martin (Tatton)
Brazier, Julian



Brooke, Rt Hon Peter


Bercow, John
Browning, Mrs Angela


Blunt, Crispin
Bruce, Ian (S Dorset)


Boswell, Tim
Cash, William





Chapman, Sir Sydney (Chipping Barnet)
McIntosh, Miss Anne



MacKay, Rt Hon Andrew


Clappison, James
Maclean, Rt Hon David


Collins, Tim
McLoughlin, Patrick


Cormack, Sir Patrick
Malins, Humfrey


Cran, James
Mates, Michael


Davies, Quentin (Grantham)
Maude, Rt Hon Francis


Davis, Rt Hon David (Haltemprice)
Mawhinney, Rt Hon Sir Brian


Donaldson, Jeffrey
May, Mrs Theresa


Dorrell, Rt Hon Stephen
Moss, Malcolm


Duncan Smith, Iain
Norman, Archie


Faber, David
Ottaway, Richard


Fabricant, Michael
Page, Richard


Fallon, Michael
Paice, James


Flight, Howard
Paterson, Owen


Forth, Rt Hon Eric
Pickles, Eric


Fowler, Rt Hon Sir Norman
Portillo, Rt Hon Michael


Fox, Dr Liam
Prior, David


Gale, Roger
Randall, John


Garnier, Edward
Redwood, Rt Hon John


Gibb, Nick
Robathan, Andrew


Gill, Christopher
Robertson, Laurence


Gillan, Mrs Cheryl
Ross, William (E Lond'y)


Gray, James
Rowe, Andrew (Faversham)


Green, Damian
Ruffley, David


Greenway, John
Sayeed, Jonathan


Grieve, Dominic
Shephard, Rt Hon Mrs Gillian


Hague, Rt Hon William
Simpson, Keith (Mid-Norfolk)


Hamilton, Rt Hon Sir Archie
Spicer, Sir Michael


Hammond, Philip
Stanley, Rt Hon Sir John


Hawkins, Nick
Steen, Anthony


Heald, Oliver
Swayne, Desmond


Heathcoat-Amory, Rt Hon David
Swinney, John



Syms, Robert


Hogg, Rt Hon Douglas
Tapsell, Sir Peter


Horam, John
Taylor, Ian (Esher & Walton)


Howard, Rt Hon Michael
Taylor, John M (Solihull)


Howarth, Gerald (Aldershot)
Taylor, Sir Teddy


Jack, Rt Hon Michael
Townend, John


Jackson, Robert (Wantage)
Tredinnick, David


Jenkin, Bernard
Trend, Michael


Key, Robert
Tyrie, Andrew


King, Rt Hon Tom (Bridgwater)
Waterson, Nigel


Kirkbride, Miss Julie
Whittingdale, John


Laing, Mrs Eleanor
Wigley, Rt Hon Dafydd


Lansley, Andrew
Wilkinson, John


Leigh, Edward
Willetts, David


Letwin, Oliver
Wilshire, David


Lewis, Dr Julian (New Forest E)
Winterton, Mrs Ann (Congleton)


Lidington, David
Winterton, Nicholas (Macclesfield)


Lilley, Rt Hon Peter
Yeo, Tim


Lloyd, Rt Hon Sir Peter (Fareham)
Young, Rt Hon Sir George


Llwyd, Elfyn


Loughton, Tim
Tellers for the Noes:


Luff, Peter
Mr. Geoffrey Clifton-Brown


Lyell, Rt Hon Sir Nicholas
and


MacGregor, Rt Hon John
Mr. Peter Atkinson.

Question accordingly agreed to.

Clause 30 ordered to strand part of the Bill.

To report progress and ask leave to sit again.—[Mrs. McGuire.]

Committee report progress: to sit again tomorrow.

Orders of the Day — WELSH GRAND COMMITTEE

Motion made, and Question put forthwith, pursuant to Standing Order No. 108 (Welsh Grand Committee (sittings)),
That the Welsh Grand Committee shall meet on Tuesday 16th May at half past Ten o'clock and between Four o'clock and Six o'clock at Westminster to take questions under Standing Order No. 103, (Welsh Grand Committee (questions for oral answer)), and to consider the Welsh Economy, under Standing Order No. 107 (Welsh Grand Committee (matters relating exclusively to Wales))—[Mrs. McGuire.]

Question agreed to.

Orders of the Day — ADJOURNMENT (WHITSUN)

Motion made, and Question put forthwith, pursuant to Standing Order No. 25 (Periodic adjournments),
That this House, at its rising on Thursday 25th May, do adjourn till Monday 5th June 2000.—[Mrs. McGuire.]

Question agreed to.

Orders of the Day — BUSINESS OF THE HOUSE

Mr. Deputy Speaker (Mr. Michael J. Martin): For the convenience of the House, I shall put together the motions relating to the Business of the House.

Ordered,
That, at the sitting on Thursday 25th May, the Speaker shall not adjourn the House until she shall have notified the Royal Assent to Acts agreed upon by both Houses.
That on Thursday 25th May there shall be no sitting in Westminster Hall.—[Mrs. McGuire.]

Orders of the Day — DELEGATED LEGISLATION

Mr. Deputy Speaker: With permission, I shall put together the motions relating to delegated legislation.

Ordered,

NATIONAL HEALTH SERVICE

That the National Health Service (Pension Scheme and Compensation for Premature Retirement) (Amendment) Regulations 2000 be referred to a Standing Committee on Delegated Legislation.

COUNTY COURT FEES

That the County Court Fees (Amendment No. 2) Order 2000 be referred to a Standing Committee on Delegated Legislation.—[Mrs. McGuire.]

Orders of the Day — Welsh Economy (Cardiff Airport)

Motion made, and Question proposed, That this House do now adjourn.—[Mrs. McGuire.]

Mr. John Smith: I am grateful for the opportunity to address the House in the Adjournment debate, as it allows me to raise an important issue—the crucial role that Cardiff international airport in my constituency plays in the development of the Welsh economy. I am delighted to see that so many hon. Members have found time to stay behind and listen to the debate at such a late hour.
I welcome the opportunity because of the timing. It is my belief, and the view of the overwhelming majority of the business community throughout Wales—not just in my constituency and not just in south Wales—that the future development of our only international airport is vital to the future economic success of our country.
However, a number of decisions taken recently cause me concern. One is the decision to shelve the construction of phase 1 of the airport link road, which was taken by the National Assembly for Wales a couple of months ago, on good grounds. I understand the reasons why the decision was made. The road was considered to be extremely expensive but, sadly, there are no obvious alternatives to the provision of that road.
I also believe that the timing of the debate is important and helpful because of the European Commission's recent rejection of the Government's concerted efforts to get Wales's only international airport on the assisted areas map for Wales. They were unfortunately rejected because of the European Commission's guidelines and rules.
I fear that the enthusiasm for the growth and development of Wales's only international airport, its key role in the Welsh economy and, more important, ensuring the right infrastructure to serve it and thus facilitate growth, is waning. I hope that I am wrong. The most important reason for the debate is to get that airport, and road access to it, firmly back on the political agenda, especially in the light of recent decisions.
My main reason for choosing Cardiff international airport as the subject of the debate is not the benefits that a positive decision would bring to my constituency, although it would benefit considerably; my prime motive is the benefits that the airport could bring to the whole of Wales. Together with objective 1 funding, such a decision would help us to bring Wales back on a par with the United Kingdom for wealth creation per head of population. In 20 years of Tory Government, gross domestic product per head sadly declined to 83.1 per cent. of the United Kingdom average. The gap continues to widen. All our energies must now focus on closing it.
The airport is important because I am not convinced that we can achieve our objective even with objective 1 funding, which is vital for the valleys and mid and west Wales, unless we get our act together on the airport. There are several reasons for that. No region in the European Union has succeeded in regenerating its economy—even with European structural funds—without a first-class, viable international airport, which provides regular, scheduled business flights. Stuttgart airport in Baden-Wurttemberg is a major facilitator for business in that

region. Barcelona airport plays a crucial role in the success of Catalonia. It received a heavy injection of funding because of the Olympic games.
Let us look a little closer to home and consider the fastest-growing economy in Europe, which is that of the Irish Republic. It has a population of between 3.7 million and 4 million; it has three major international airports, which cater for 16 million passengers a year. In Wales, our population is roughly three quarters that of the Irish Republic—between 2.7 million and 2.9 million—yet our international airport handles only 1.3 million passengers a year. We will not be taken seriously as a region if we do not develop a first-class regional airport which provides international flights, especially for our business community.
My view, which, I believe, is shared by business throughout Wales—if not by decision makers of all political persuasions—is that air travel is the most important mode of business transport. It is at the cutting edge of business communications. If sophisticated air travel is not available to the business community, the right investment decisions will not be made in the interests of Wales.
Key decisions, especially on overseeing major projects or the expansion of existing investment, may not be taken simply because those at the top of business organisations cannot fly to the region to observe projects and the investment location. A lot of people outside the business community do not understand that such a facility is crucial to business decision making. Nor do they realise—because of the advent of the internet, the telephone, video conferencing and all the rest of it—the importance of interpersonal contact and of decision makers being able to visit a site before recommending whether an investment should be made. Wales lost out on investment because it did not have such a facility.
Time is money in business and the business community has told me that, if people cannot get to a location to assess the value of an investment, the chances are that the key decision makers will go elsewhere. Wales cannot allow that barrier to remain if we are to succeed over the next six or seven years in our endeavour to regenerate the Welsh economy. The role of business will be crucial and, in the foreseeable future and over the period in which European structural funds will come to Wales, air travel will become more important to business communication in a global economy.
All the expectations are for large-scale growth in European air travel in general and exceptional growth in business travel across Europe. Air travel is the cutting edge of business communication in the United States, which is the most developed single market in the world. Walk on/walk off intra-continental business flights, which are increasingly becoming a feature of successful business, are available throughout the United States and, increasingly, in Canada and Mexico, which are part of the North American Free Trade Area.
As the European Union continues to develop as a single market—Wales has a closer trading relationship and depends more on trade with Europe than does any other part of the United Kingdom—what will become domestic flights within the single market will grow in importance. Therefore, it is vital that we get the airport's development right. However, let me make it clear to the House that Cardiff international airport is one of the most modern


in the country and, although it handles only 1.3 million passengers a year, it has the capacity for more than 4 million.
Those who have the privilege of visiting the airport will discover that it has a fast-track terminal facility, modern baggage-handling facilities, walk-on gangways that go straight to the aircraft, modern shops and restaurants—it is first class. I should not mention other areas, but I will on this occasion: Bristol does not get a look-in. It also has one of the most advanced air traffic control systems in the United Kingdom. Although it handles civilian aircraft—mainly charter planes, a limited number of scheduled flights and an even more limited number of business flights—it also deals with the considerable number of military aircraft at RAF St. Athan and en route transatlantic flights over Wales.
A sophisticated modern facility could provide huge benefits for the area. There is a 100 acre business development site adjacent to Cardiff airport and, in a three mile radius, there is a 200 acre development site at the port of Barry, which my hon. Friend the Minister visited only recently. He recognised the huge potential for growth there. A 240 acre site at Rhoose point is also in striking distance. In short, Cardiff international airport's development potential is greater than that which existed at Shannon, which is one of the best examples of using an airport to drive forward investment and an enterprise zone, on the west coast of Ireland. We have seen how successful the Irish have been. Ireland is now the largest software exporter in the world apart from the United States, and part of that is due to the development and enhancement of its business communications.
What, then, is the problem with the development of Cardiff airport? It is a very simple problem: how on earth are we to get between 3 million and 4 million extra passengers—for that is the number that we need if we are to have a successful airport—along the road that services it? First, they will have to negotiate the nightmare of the Culverhouse Cross junction, which is gridlocked between 8 am and 10 am and between 4 pm and 6 pm every day. That puts a stranglehold not only on the development of the airport, but on the western part of the capital city: commuter traffic is now so snarled up that it has become a local joke.
A single carriageway, the A4050, is interspersed with roundabouts throughout its length. It can only be described as the sort of road that one might expect to see when approaching an international airport in a third-world country: that is how small it is, given the job that it is expected to do. Those 3 million or 4 million extra passengers will be competing with industrial traffic going to Barry docks, and with holiday traffic going to Barry island and the beautiful Vale of Glamorgan; they will also be competing with the commuter traffic that becomes snarled up daily at Culverhouse Cross.
The Civil Aviation Authority tells us that the catchment area for the airport has the potential to contain 5 million air passengers. I have already said that the airport handles 1.3 million, and could handle more than 4 million. We are talking about achievable targets, but to ensure that they are met we must provide appropriate access.
I am confident that, in the next two years, the Vale of Glamorgan railway line will be reopened as a result of the Government's excellent work. That will provide a station

within half or three quarters of a mile of the airport, which is welcome but should be seen in perspective: the station will cater for, at the best estimate, only 5 or 6 per cent. of airport traffic, or passenger access. The road is crucial; it is vital to the future development of Wales.
It would be a tragedy if we did not do all that is humanly possible to ensure that Wales can exploit its additional funds to use this unique opportunity to rebuild its economy and return it to what it was some 20 or 25 years ago, when people were highly skilled and highly paid and Wales had a high percentage of the UK's average gross domestic product per capita. Twenty years of Tory rule saw us become a low-wage, low-skill economy with 83.1 per cent. of GDP. We must put that right—that is the challenge that we all face—and I think that we can put it right.
Wales has enormous potential for economic development. The M4 corridor in the south is probably the most attractive investment location in the European Union. It is highly competitive, it has direct access to the core consumer markets in Europe for products and services, and it provides a high quality of life. The A55 corridor provides a splendid environment for commercial and service sector industries, and also provides access to a good airport: I will not name it, but we all know which it is. However, the same does not apply to the other three quarters of Wales and Welsh business.
In central Wales and the valleys, we have enormous potential in terms of human capital. We have an enterprise culture. We have talents and skills. We can use objective 1 money to invest in and to exploit those, and to ensure that we get all the benefits out of the strategic advantages that Wales has, but the development of the airport is crucial. There is a direct correlation between the growth of the airport, the growth of business travel in Wales and the success of the economy, so I call on my hon. Friend the Minister to bear that in mind and to do whatever he can.
I realise that the issue affects every level of government—not just the House, the National Assembly for Wales or the local authority, which has a big responsibility in the matter—but we must as a matter of urgency find an alternative access to that airport. If one has been rejected on cost grounds, and it was a bit of a belt-and-braces project, we must find an alternative and we must find it together quickly. We must have an open mind on the matter. We must consider joint ventures, partnerships with the private sector or whatever. As a nation, we must find a mechanism for providing that vital link to the airport, which will provide a vital engine of growth for the Welsh economy. I am sure that we can do that and I look forward to my hon. Friend remarks with anticipation.

The Parliamentary Under-Secretary of State for Wales (Mr. David Hanson): I thank my hon. Friend the Member for Vale of Glamorgan (Mr. Smith) for the excellent way in which he has championed Cardiff airport. He enthusiastically set out a strong case for the success of the airport, showing in great detail the way in which the Government, the National Assembly, the local authority and all the agencies that are concerned about the future of the airport and, indeed, the future economic prosperity of the Vale of Glamorgan, Cardiff and south Wales generally, can benefit from the airport's success.
I am particularly pleased to see such a good turnout for an Adjournment debate. I pay tribute to my hon. Friends the Members for Clwyd, West (Mr. Thomas), for Preseli Pembrokeshire (Mrs. Lawrence), for Cardiff, North (Ms Morgan) and, indeed, for Islwyn (Mr. Touhig) for attending the debate. I am also pleased to see the right hon. Member for Caernarfon (Mr. Wigley) and the hon. Member for Brecon and Radnorshire (Mr. Livsey) showing cross-party support. We briefly had a representative of the other main party in the House with us, but we certainly have all parties representing Wales in the Chamber. It is particularly important that we have such an interesting and lively turnout of Members to help with the debate.
I am particularly grateful to my hon. Friend the Member for Vale of Glamorgan for drawing the House's attention to the importance of Cardiff international airport. As he has said, it is a valuable asset which adds greatly to the economic attractions of south Wales. He emphasised business, the links with business and maximising the opportunities of, for example, objective 1 status, which are important issues.
There is no doubt that, with modern terminal buildings and the aircraft facilities that it has, Cardiff is one of the fastest growing regional airports in Britain. We should celebrate that fact. The airport already has scheduled services to Aberdeen, Amsterdam, Belfast, Brussels, Dublin, Edinburgh, Glasgow, Guernsey, Jersey, the Isle of Man and Paris, highlighting and illustrating the great European context of Cardiff airport, which my hon. Friend mentioned.
The success is shown by the fact that the owner of Cardiff airport, TBI, was recently able to announce that 1999 had been a record year for the airport, with more than 1.3 million passengers using it, representing an increase of more than 6 per cent. on the previous 12 months. The new departure lounges and the arrivals hall mean that it now has the capacity to handle up to 2.5 million passengers per year. I was pleased to hear my hon. Friend mention a higher figure of, potentially, up to 4 million. I am sure that TBI is looking for further year-on-year growth.
Cardiff airport houses one of the most modern aircraft maintenance facilities in Europe, providing more than 700 good-quality jobs, together with related training opportunities. However, I recognise that the airport has untapped potential, as my hon. Friend has said; he has emphasised that. It is fair to say that far too many people from within its catchment area have to travel further afield to find the air services that they require. Additionally, there is a considerable way to go in encouraging the growth of air travel between north and south Wales. I recognise that fact particularly as an hon. Member representing a north Wales constituency but speaking about an airport in Cardiff.
As my hon. Friend will be aware, the Welsh regional air services study was commissioned in July 1998 by the then Welsh Office and the Department of the Environment, Transport and the Regions. Work will shortly be completed on the study, and I hope that the report will provide us with a clearer view on the role of airports in the Welsh economy.
The study has not yet been published, but it was done on the basis of a remit from the former Welsh Office and DETR to examine the very point that my hon. Friend dealt

with in his speech—the links between air services and economic growth—and to explore the scope for developing new services and airport facilities, including the potential for north-south Wales links. Both the Government and the Assembly will now have to examine the conclusions—which we shall do shortly—that the consultants have reached. We hope to be able to develop future policy on airports and air travel on the basis of the report. Cardiff, as the major airport in Wales, will clearly figure highly in our considerations.
One of the key points that my hon. Friend made in his speech was on access to the airport. The Government have made it clear that the development of sustainable integrated transport facilities is one of our major policy objectives. Examining the relationships between air and surface travel must form a key part of achieving that objective.
As my hon. Friend said, the main access roads to the airport are the responsibility of various bodies, but principally of Vale of Glamorgan council. As my right hon. Friend the Secretary of State for Wales has previously told the House in reply to questions from my hon. Friend, the council has already allocated significant sums for design and preparation work for phase 1, between Culverhouse Cross and the Barry dock link road. However, I understand that, in the short to medium term, the scheme has been identified as too expensive to accommodate in the transport grant programme.
Although I recognise the potential benefit to the airport of undertaking the project, the assessment of relative priorities is wholly a matter for the National Assembly for Wales to make, in consultation with local authorities and other interested parties. In considering the matter further, they will be able to take account of the outcome of the new study which I mentioned into the congestion problems at Culverhouse Cross. On 9 February, Peter Law, the Assembly Secretary, announced that the Assembly would commission that joint study—with Cardiff council and Vale of Glamorgan council—on the congestion problems at Culverhouse Cross.
I understand that the owners of the airport—for reasons mentioned by my hon. Friend—also are anxious to improve access and have a proposed solution of their own. If they wish to proceed with the matter as a joint venture, they will need to develop a detailed business case for further consideration by the Assembly and the council. I therefore hope that, given the difficulties of which my hon. Friend is aware, there is the possibility of further developments on another access road.
There are other possibilities for improving access. As my hon. Friend mentioned, reopening the Vale of Glamorgan railway line to passenger traffic could provide an additional access route to the airport—using a shuttle bus service between a new station, at Rhoose, and the airport terminal. Both Vale of Glamorgan council and Bridgend council are currently supporting design work on such a proposal as part of their development of a wider integrated transport proposal.
I can certainly see the potential advantages that such a scheme would offer. However, in the first instance—I hope that my hon. Friend will accept this in the spirit in which it is said—it will be for the two councils to judge the priority that they accord to the scheme when submitting to the National Assembly their bids for a transport grant. I hope that positive action on that matter will be considered to help improve access to the airport.
My hon. Friend mentioned the matter of assisted area status in Vale of Glamorgan. I realise that there are certainly concerns about the omission of Barry and certain other areas from the new assisted areas map. However, I should like to pay tribute to his efforts on behalf of Barry and the whole of his constituency to try to secure assisted area status for the areas adjacent to the airport.
I assure my hon. Friend that my right hon. Friends the Secretaries of State for Wales and for Trade and Industry are conscious of the points that he has made this evening and on other occasions about the importance of the local economy. It has been very difficult to include the areas that he wants in the assisted areas map because, as he knows, the European Commission requirements meant that we had to reduce the map considerably. Those requirements take account of a range of factors, including population and employment statistics. We have to take objective and rational decisions on where to draw the boundaries. My right hon. Friends have been keen to secure the best possible deal for Wales.
Barry and the airport are currently excluded. Today is the closing date for consultation on the proposed map. I take the points that my hon. Friend has made as further representations. Any proposals for amendments will be examined thoroughly by my right hon. Friends before the map is finalised. For complex technical reasons, we have not yet found a way to include Barry and the airport in the map on the criteria set down by the Commission.
My hon. Friend has made valuable points about the need to maximise objective 1 and employment opportunities for the airport. Employment and the

economy of Barry are linked directly to the success of the airport in many ways. I do not underestimate the advantages that assisted area status and development at the airport can bring to Barry. Next week my right hon. Friend the Secretary of State will have the pleasure of opening the major extension to the Dow Corning factory in Barry, which provides 200 new jobs for the area and demonstrates the continued commitment of major international employers to the vale of Glamorgan. The redevelopment of the old town hall site will begin shortly, greatly enhancing the appearance of central Barry, as well as providing new shops and other commercial outlets, while industrial units in the area continue to enjoy high occupancy rates.
As my hon. Friend will be aware, the new waterfront residential development also promises significant benefits. I was pleased to take up his offer of an invitation to visit recently, when I saw at first hand the success of the waterfront area and the potential that it has for Barry and south Wales as a whole, when linked to the success of the airport. With or without assisted area status, it is important to build on those assets in promoting the attractions of the vale of Glamorgan and the Cardiff area for economic development. I have no doubt that encouraging greater use of Cardiff international airport can play a major role in achieving that. I pay tribute to the representations that my hon. Friend has made—

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MR. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twelve minutes to Eleven o'clock.